Treasury  Department    :    :    Bureau  of  Internal  Revenue 


■  Bulletin"!" 


INCOME  TAX 


>mparison  of  Titles  and  Sections  of 
t  Revenue  Acts  of  1918  and  1921 
Applicable  to  Income  and 
Profits  Taxes 


MAY  1.  1922 


WASHINGTON 

GOVERNMENT  PRINTING  OFnCE 

1922 


Treasury  Department     :     :    Bureau  of  Internal  Revenue 

Bulletin  "I" 

INCOME  TAX 

Comparison  of  Titles  and  Sections  of 

the  Revenue  Acts  of  1918  and  1921 

Applicable  to  Income  and 

Profits  Taxes 


MAY  1.  1922 


•     WASHINGTON 
GOVERNMENT  PRINTING  OFFICE 
1922 


The  Internal  Revenue  Bulletin  supersedes  the  Income  Tax 
and  Sales  Tax  bulletins  previously  published  by  the  Bureau  of 
Internal  Revenue.  The  service,  consisting  of  weekly  bulletins 
of  income,  sales,  capital-stock,  estate,  child-labor,  and  miscella- 
neous tax  rulings.  Bimonthly  Digests  of  the  rulings  published  in 
the  weekly  bulletins,  and  semiannual  cumulative  bulletins  con- 
taining in  full  the  rulings  published  in  the  weekly  bulletins  dur- 
ing the  previous  six  months,  may  be  obtained  by  subscription  for 
$2  per  year. 

The  Bimonthly  Digests  will  be  printed  under  separate  cover 
and  will  cumulate  during  the  year;  that  is,  the  issue  for  March 
and  April  will  contain  cumulatively  also  the  digest  for  January 
and  February,  and  so  on  throughout  the  year,  making  the  issue 
for  November  and  December — ^the  sixth  digest — cover  the  rulings 
rendered  during  the  entire  calendar  year. 

New  subscribers  and  others  desiring  to  obtain  the  1919,  1920, 
and  1921  Income  Tax  Service  may  do  so  from  the  Superintend- 
ent of  Documents  at  prices  as  follows:  Digest  of  Income  Tax 
Rulings  No.  19  (containing  digests  of  all  rulings  appearing  in 
Cumulative  Bulletins  1  to  5,  inclusive),  50  cents  per  copy;  Cu- 
mulative Bulletins  Nob.  1  to  5,  containing  in  full  all  rulings 
published  since  June,  1919,  to  and  including  December,  1921, 
as  follows:  No.  1,  30  cents;  No.  2,  25  cents;  No.  3,  30  cents; 
No.  4,  30  cents;  No.  5,  25  cents. 

Persons  desiring  to  obtain  the  one  issue  of  Sales  Tax  Bulletin 
for  1920,  Bulletin  ST-1-20,  and  the  Cumulative  Bulletins  for 
January-June  and  July-December,  1921,  may  procure  them 
from  the  Superintendent  of  Documents  at  15  cents  and  5  cents 
each,  respectively,  per  copy. 

All  inquiries  and  subscriptions  should  be  sent  to  the  Superin- 
tendent of  Documents,  Government  Printing  Office,  Washing- 
ton, D.  C. 


(«) 


PREFACE. 


This  comparison  of  the  Revenue  Acts  of  1918  and  1921  is  made  on 
the  following  general  plan : 

(a)  Only  those  titles  and  sections  relating  or  applicable  to  income  and  profits 

taxes  are  compared. 

(b)  The  comparison  follows  numerically  the  order  of  the  sections  of  the  1921 

Act. 

(c)  Difference  in  treatment  of  similar  subjects  in  the  two  Acts,  provisions  of 

either  Act  not  contained  in  the  other,  and  entirely  new  provisions  of  the 
1921  Act  are  emphasized. 

(d)  In  all  cases,  regardless  of  how  the  subject  is  treated,  corresponding  sections 

of  the  two  Acts  are  placed  opposite  each  other.     If  the  subject  is  treated 
similarly  in  both  Acts,  notation  to  that  effect  is  made. 

(e)  Although  it  is  intended  to  emphasize  differences,  in  some  instances  where 

a  subject  is  entirely  new  in  the  1921  Act,  mere  notation  to  that  effect  is 

made,  since  reference  can  readily  be  made  to  the  Act  itself  for  particulars. 

(/)  Reference  is  made  in  some  instances  to  Regulations  45  and  to  the  Income 

Tax  Bulletin  Service,  where  a  subject  may  be  specifically  covered  in  one 

,         Act  but  is  mentioned  only  in  regulations  or  rulings  made  pursuant  to  the 

other  Act. 
(g)  Abbreviations  used,  with  explanation,  are  as  follows: 

C.  B. — Cumulative  Bulletin  of  the  Income  Tax  Bulletin  Service. 

O.  D. — Office  Decision,  published  in  cumulative  Jpulletin. 

R.  S. — Revised  Statutes  of  the  United  States. 

Reg. — Regulations  of  the  Treasury  Department. 

Sol.  Op. — Opinion  of  the  Solicitor  of  Internal  Revenue. 

T.  B.  M. — Memorandum  of  the  Advisory  Tax  Board,  published  in 

cumulative  bulletin. 
T.  D. — Treasury  Decision. 

(Ill) 


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COMPARISON  OF  THE  INCOME  AND  PROFITS  TAX  PROVISIONS 
OF  THE  REVENUE  ACTS  OF  1018  AND  1921. 


1918. 

TITLE  XIV.— GENERAL 
PROVISIONS. 

Section  1405. 

Citation  of  Act — Revenue  Act  of  1918. 

TITLE   I.— GENERAL 
DEFINITIONS. 

Section  1. 


TITLE  II.— INCOME  TAX. 
Part  I. — General  Provisions. 

Section  200. — Definitions. 


Section  201. — Dividends. 


(a) 


No  similar  provision. 
No  Bimilar  provision. 


1921. 

TITLE  I.— GENERAL 
DEFINITIONS. 

Section  1. 

Citation  of  Act — Revenue  Act  of  1921. 


Section  2. 

Same  as  section  1  of  1918  Act  except 
that  the  following  definitions  are  omitted 
from  this  section: 

(1)  Revenue  Act  of  1916. 

(2)  Revenue  Act  of  1917. 

(3)  Present  war. 

(4)  Termination  of  the  present  wat. 

TITLE   II.— INCOME   TAX. 
Part  I. — General  Provisions. 

Section  200. — Definitions. 

Same  as  section  200  of  the  1918  Act 
except  that  the  definition  of  the  "first 
taxable  year"  is  changed  so  as  to  apply 
to  1921  instead  of  1918. 

Section  201. — Dividends. 

(a)  The  definition  of  "dividend"  is 
changed  so  as  to  exclude  (1)  "dividends" 
as  used  in  section  245(a)4:  (2)  distribu- 
tions by  personal  service  corporations  out 
of  earnings  or  profits  accumulated  during 
calendar  years  1918,  1919,  1920,  and  1921, 
and  (3)  stock  dividends. 

(b)  Same  general  provisions  as  section 
201(b)  of  1918  Act  and  in  addition  there- 
to, the  following: 

(1)  Increase  in  value  of  property  ac- 
crued prior  to  March  1,  1913,  may  be 
distributed  free  from  tax  after  the  earn- 
ings and  profits  accumulated  since  Feb- 
ruary 28,  1913,  have  been  distributed. 

(2)  Provision  is  made  for  computation 
of  loss  upon  sale  of  stock  upon  which  a 
tax-free  distribution  has  been  made. 


(1) 


1918. 

(c)  Stock  dividends  are  not  taxable  to 
recipients  notwithstanding  the  provi- 
sions of  this  subdivision.  See  Eisner  v. 
Macomber,  T.  D.  3010,  0.  B.  3,  p.  25. 

A  distribution  in  liquidation  of  a  cor- 
poration is  treated  as  a  payment  in  ex- 
change for  stock  or  shares  and  any  gain 
or  profit  derived  therefrom  by  the  dis- 
tributee is  taxed  to  him  in  the  same 
manner  as  other  gains  or  profits. 

No  similar  provision. 


(d)  Taxation  of  stock  dividends  received 
between  January  1  and  November  1, 1918. 
Ineffective,  see  Eisner  v.  Macomber, 
Bupra. 


No  similar  provision. 


(e) 


Section  202. — Basis  for  Determining 
Gain  or  Loss. 


(a)2 


No  similar  provision.  The  basis  for 
computing  gain  or  loss  on  sale  of  property 
acquired  by  gift  or  bequest  is  the  fair  mar- 
ket value  of  the  property  at  the  time  of 
acquisition,  and  the  computation  is  to  be 
made  in  accordance  with  article  1561  of 
Regulations  45  as  amended  by  T.  D.  3206. 
Bee  article  1562  as  amended. 


1921. 

See  comparison  under  subdivision  (a). 
No  similar  provision. 


"(c)  Any  distribution  (whether  in  cash 
or  other  property)  made  by  a  corporation 
to  its  shareholders  or  members  otherwise 
than  out  of  (1)  earnings  or  profits  accumu- 
lated since  February  28,  1913,  or  (2)  earn- 
ings or  profits  accumulated  or  increase  in 
value  of  property  accrued  prior  to  March 
1,  1913,  shall  be  applied  against  and  re- 
duce the  basis  provided  in  section  202 
for  the  purpose  of  ascertaining  the  gain 
derived  or  the  loss  sustained  from  the 
sale  or  other  disposition  of  the  stock  or 
shares  by  the  distributee." 

(d)  Stock  dividends  are  not  taxable 
unless  subsequent  cancellation  or  redemp- 
tion of  its  stock  by  the  corporatioiTlias  the 
effect  of  making  the  stock  dividend  essen- 
tially equivalent  to  the  distribution  of  a 
taxable  dividend. 

(e)  Provision  made  for  including  tax- 
able distributions  in  gross  income  of  r'is- 
tributee  as  of  date  when  made  unquali- 
fiedly subject  to  his  demands. 

(f)  This  subdivision  is  ineffective  after 
December  31,  1921;  otherwise,  it  is  the 
same  as  section  201(e)  of  the  1918  Act. 

Section  202. — Basis  for  Determining 
Gain  or  Loss. 

(a)l.  Same  provisions  as  section  202(a)2 
of  1918  Act. 

(a)2.  This  subdivision  is  new.  Provi- 
sion for  computing  gain  or  loss  upon  sale 
of  property  acquired  by  gift:  • 


When  acquired. 

Basis. 

After  Dec.  31, 
1920. 

On    or    before 
Dec.  31, 1920. 

Same  as  it  would  have  in 
the  hands  of  donor  or  last 
preceding  owner  who  did 
not  acquire  it  by  gift. 

Fair  market  price  or 
value  at  the  time  of  acqui- 
sition. 

1918. 

See  comparison  of  subdivision  (a)2. 


(a)l .  Prior  to  the  date  of  the  Supreme 
Court  decisions  mentioned  opposite,  the 
basis  for  computing  gain  or  loss  on  Kale 
of  propertj^  acquired  prior  to  March  1, 
1913,  was  its  value  on  that  date,  irre- 
spective of  its  cost. 

(b)  Property  received  in  exchange 
ifl  treated  as  the  equivalent  of  cash  to 
the  amount  of  its  fair  market  value,  if  any. 

No  similar  provision. 


(b)  If  the  aggregate  par  or  face  value 
of  the  stock  or  securities  received  as  a 
result  of  a  reorganization,  merger,  or  con- 
solidation is  no  greater  than  the  aggregate 
par  or  face  value  of  the  stock  or  securities 
exchanged,  no  gain  or  loss  results  for  in- 
come tax  purposes;  but  if  the  aggregate 
par  or  face  value  of  the  stock  or  securi- 
ties received  is  in  excess  of  the  aggre- 
gate par  or  face  value  of  those  ex- 
changed, "a  like  amount  in  par  or  face 
value  of  the  new  stock  or  securities 
received  shall  be  treated  as  taking  the 
place  of  the  stock  or  securities  exchanged, 
and  the  amount  of  the  excess  in  par  or 
face  value  shall  be  treated  as  a  gain  to  the 
extent  that  the  fair  market  value  of  the 
new  stock  or  securities  is  greater  than  the 
cost  (or  if  acquired  prior  to  March  1, 
1913,  the  fair  market  value  as  of  that 
date)  of  the  stock  or  securities  exchanged . ' ' 

No  similar  provision,  but  under  article 
1566  of  Regulations  45,  taxable  gain  or 
deductible  loss  results  from  such  trans- 
actions, the  amount  thereof  to  be  de- 
termined imder  article  1561. 


1921. 

(a)3.  This  subdivision  is  new.  Pro- 
vision for  computing  gain  or  loss  on  sale 
of  property  acquired  by  bequest,  devise, 
or  inheritance.  The  same  basis  is  pro- 
vided as  in  article  1562  of  Regulations  45 
under  the  1918  Act. 

This  provision  is  applicable  to  the 
property  interests  specified  in  section 
402(c)  or  (e). 

(b)  This  subdivision  covers  the  same 
subject  as  section  202(a)  1  of  the  1918  Act 
but  is  changed  so  as  to  conform  to  the 
decisions  of  the  United  States  Supreme 
Court  in  Goodrich  v.  Edwards,  T.  D.  3174 
(C.  B.  4,  p.  40)  and  Walsh  v.  Brewster, 
T.  D.  3176  (C.  B.  4,  p.  41). 

(c)  No  gain  or  loss  recognized  unless 
property  received  in  exchange  has  a 
readily  realizable  market  value. 

(c)l.  No  gain  or  loss  recognized  when 
property  received  in  exchange  has  a 
reaaily  realizable  market  value  but  re- 
places in  kind  and  use  property  held  for 
investment  or  for  productive  use  in  trade 
or  business  (not  including  stock  in  trade 
or  other  property  held  primarily  for 
sale). 

(c)2.  No  gain  or  loss  recognized  "  WTien 
in  the  reorganization  of  one  or  more  cor- 
porations a  person  receives  in  place  of  any 
stock  or  securities  owned  by  him,  stock  or 
securities  in  a  corporation  a  party  to  or 
resulting  from  such  reoi^anization.  The 
word  'reorganization,'  as  used  in  this 
paragraph,  includes  a  merger  or  consolida- 
tion (including  the  acquisition  by  one  cor- 
poration of  at  least  a  majority  of  the 
voting  stock  and  at  least  a  majority  of  the 
total  number  of  shares  of  all  other  classes 
of  stock  of  another  corporation,  or  of 
substantially  all  the  properties  of  another 
corporation),  recapitalization,  or  mere 
change  in  identity,  form,  or  place  of 
organization  of  a  corporation,  (however 
effected)"; 


(c)3.  No  gain  or  loss  recognized  when 

Eroperty  is  transferred  to  a  corporation 
y  a  person  or  persons  who,  immediately 
after  the  transfer,  are  in  control  of  the 
corporation,  and  the  amounts  of  stock, 
securities,  or  both  received  by  such  per- 
sons are  in  substantially  the  same  propor- 
tions as  their  interests  in  the  property 
before  the  transfer. 

A  person  is,  or  two  or  more  persons  are, 
"in  control"  of  a  corporation  when  they 
own  at  least  80  per  cent  of  the  voting 
stock  and  at  least  80  per  cent  of  all  the 
other  classes  of  stock  of  the  corporation. 


1918. 


1921. 


The  same  principle  is  recognized  in 
Bubdivision  (b)  of  section  202  of  this  Act. 


No  similar  provision  but  see  articles  49 
and  50  of  Regulations  45. 


No  simliar  provision.  Under  this  Act, 
losses  (5n  such  bona  fide  sales  are  deducti- 
ble.   See  O.  D.  103,  0.  B.  1,  p.  124. 


*Io  similar  provision. 


No  similar  provision. 


Section  203.— Inventories. 


Section  204. — Net  Losses. 

(a)  "Net  loss"  refers  only  to  "net 
losses  resulting  from  either  (1)  the  opera- 
tion of  any  business  regularly  carried  on 
by  the  taxpayer,  or  (2)  the  bona  fide  sale 
by  the  taxpayer  of  plant,  building, 
machinery,  equipment  or  other  facilities, 
constructed,  installed  or  acquired  by 
the  taxpayer  on  or  after  April  6,  1917, 
for  the  production  of  articles  contributing 
to  the  prosecution  of  the  present  war." 


Net  loss  means  the  excess  of  the  deduc- 
tions allowed  by  law  (excluding  in  the 
case  of  corporations  amounts  allowed  as  a 
deduction  under  paragraph  (6)  of  sub- 
division (a)  of  section  234)  over  the  sum 
of  the  gross  income  plus  any  interest  re- 
ceived free  from  taxation  both  under  this 
title  and  under  Title  III. 


(d)l.  When  no  gain  or  loss  is  recognized 
under  subdivision  (c)  the  property  re- 
ceived in  exchange  is  treated,  for  the  pur- 
poses of  this  section,  as  taking  the  place 
of  the  property  exchanged  therefor,  ex- 
cept as  provided  in  subdivision  (e). 

(d)2.  Property  acquired  imder  the 
conditions  stated  in  sections  214(a)12  and 
234(a)14  to  replace  property  compulsorily 
or  involuntarily  converted  into  cash  or  its 
equivalent  is  treated  as  taking  the  place 
of  a  like  proportion  of  the  property  con- 
verted. 

(d)3.  Property  acquired  in  connection 
with  so-called  "wash  sales"  for  which  no 
loss  is  deductible  is  treated  as  taking  the 
place  of  the  property  sold  or  disposed  of. 

(e)  Provision  is  made  in  this  subdi- 
vision for  cases  in  which  property  ia 
exchanged  for  other  property  having  no 
readily  realizable  market  value,  and  for 
money  or  property  having  a  readily  real- 
izable market  value.  In  general,  any 
excess  of  the  amount  of  money  and  the 
fair  market  value  of  the  property  having 
a  readily  realizable  market  value,  re- 
ceived in  exchange,  over  the  basis  pro- 
vided in  this  section  for  computing  gain 
or  loss  upon  sale  or  other  disposition  of 
the  property  exchanged,  is  taxable  gain. 

(f)  Nothing  in  this  section  shall  prevent 
taxation  of  that  portion  of  any  installment 
payment  made  according  to  contract, 
which  represents  gain  or  profit. 

Section  203. — Inventories. 

Same  as  section  203  of  1918  Act. 

Section  204. — Net  Losses. 

(a)  ' '  Net  loss  "  means  net  losses  from  the 
operation  of  any  trade  or  business  regu- 
larly carried  on  by  the  taxpayer. 

Losses  specifically  included  in  the 
definition  are  those  sustained  from  the 
sale  or  other  disposition  of  real  estate, 
machinery,  and  other  capital  assets  used 
in  the  trade  or  business.  No  reference  is 
made  to  loss  upon  sale  of  plant,  buildings, 
etc.,  constructed,  installed,  or  acquired 
by  the  taxpayer  after  April  6,  1917,  for 
the  production  of  articles  contributing  to 
the  prosecution  of  the  war  against  the 
German  Government. 

Net  loss  means  the  excess  of  the  deduc- 
tions allowed  by  section  214  or  234  over 
the  sum  of  the  follomng: 

(1)  The  gross  income  of  the  taxpayer  for 
the  taxable  year. 

(2)  The  amount  by  which  the  interest 
received  free  from  taxation  under  this 
title  exceeds  so  much  of  the  interest  paid 


1918. 


1921. 


In  computing  net  loss,  income  includes 
"tax-free  income."  Article  1601,  R^^- 
lations  45. 


(b)  The  net  loss  provisions  are  appli- 
cable to  any  taxable  year  beginning  after 
October  31,  1918,  and  ending  pnor  to 
January  1,  1920. 

A  properly  established  net  loss  is  de- 
ductible only  fiom  the  net  income  of  the 
preceding  taxable  year,  or  if  in  excess  of 
such  net  income,  thea  from  the  net  in- 
come of  the  year  next  succeeding  the  tax- 
able year  in  which  the  net  loss  was  sus- 
tained. 

Provision  is  made  for  refunding  or 
crediting  any  excess  taxes  paid  for  the 
preceding  taxable  year  in  case  it  is  neces- 
sary to  redetermine  such  taxes  on  accoai)t 
of  deducting  the  net  loss  of  the  taxable 
year. 

(c) 


No  similar  provision. 


Section  205. — Fiscal  Year  wnn 
Different  Rates. 


(a) 


(b) 


Subdivision  (a),  paragraph  1  contains  a 
similar  provision  attecting  personal  serv- 
ice corporations  with  a  fiscal  year  ended 
in  1918. 

98045°--22 2 


or  accrued  within  the  taxable  year  on 
indebtedness  as  is  not  permitted  to  be 
deducted  by  paragraph  (2)  of  subdivision 
(a)  of  section  214  or  by  paragraph  (2)  of 
subdivision  (a)  of  section  234. 

(3)  The  amount  by  which  the  deductible 
Iftsses  not  sustained  in  such  trade  or  busi- 
ness exceed  the  taxable  gains  or  profits 
not  derived  from  such  trade  or  business. 

(4)  Amounts  received  as  dividends  and 
allowed  as  a  deduction  under  paragraph 
(6)  of  subdivision  (a)  of  section  234. 

(5)  So  much  of  the  depletion  deduction 
allowed  with  respect  to  any  mine,  oil  or 
gas  well  as  is  based  upon  discovery  value 
in  lieu  of  cost. 

(b)  The  net  loss  provisions  are  appli- 
cable for  any  taxable  year  beginning  after 
December  31,  1920. 

A  properly  established  net  loss  is  de- 
ductible from  net  income  of  the  succeed- 
ing taxable  year,  and  if  in  excess  of  such 
net  income,  then  the  excess  is  deductible 
from  the  net  income  of  the  next  succeed- 
ing taxable  year. 


No  similar  provision, 
this  Act. 


Unnecessary  in 


(c)  Same  as  section  204(c)  of  1918  Act, 
except  that  the  benefit  of  this  section  is 
extended  to  insurance  companies,  subject 
to  the  tax  imposed  by  section  243  or  246. 

(d)  Pro\-ision  made  for  application  of 
this  section  in  the  case  of  taxpayers  hav- 
ing a  fiscal  year  beginning  in  1920  aud 
ending  in  1921. 

Section  205.— Fiscal  Years  1920-1921 
AND  1921-1922. 

(a)  Same  as  paragraph  1  of  section  205(a) 
of  1918  Act  except  for  changes  necessary 
to  make  applicable  to  fiscal  years  ending 
in  1921  and  the  omission  of  the  clause  re- 
lating to  personal  service  corporations. 
There  is  no  change  in  the  method  of  com- 
puting the  tax 

(b)  Same  provisions  as  section  205(b)  of 
1918  Act  with  such  changes  as  are  necessary 
to  make  the  subdivision  applicable  to  fiscal 
years  ending  in  1922.  These  changes  are 
necessary  on  account  of  the  changes  in 
tax  rates  effective  as  at  January  1,  1922. 

Pi*o\'ision  is  made  in  the  case  of  a  per- 
sonal service  corporation  for  computation 
of  the  tax  attributable  to  that  part  of  its 
fiscal    year   falling   within   1922.    After 


1918. 


1921. 


(c) 


Section  208. — Parts  of  Income  Sub- 
ject TO  Rates  for  Different  Years. 

The  subject  matter  of  section  206  of 
the  1918  Act  is  omitted  from  the  1921 
Act  being  replaced  by  an  entirely  differ- 
ent subject,  viz.,  "Capital  Gain."    . 

Gain  or  loss  from  sale  or  exchange  of 
•capital  assets  is  treated  in  the  same  man- 
ner under  the  1918  Act  as  gain  or  loss 
Resulting  from  any  other  transactions. 


Part  11. — Individuals. 

Section  210. — Normal  Tax. 


Section  211. — Surtax. 

(a)  The  surtax  begins  with  a  tax  of  1 
per  cent  of  the  amount  by  which  the  net 
income  exceeds  $5,000  and  does  not  ex- 
ceed $6,000,  and  increases  gradually  to 
a  maximum  rate  of  65  per  cent  of  the 
amount  by  which  the  net  income  ex- 
ceeds $1,000,000. 


(b)  The  surtax  attributable  to  bona 
fide  sales  of  mines,  oil  or  gas  wells  or  any 
interest  therein  where  the  principal 
value  of  the  property  has  been  demon- 


December  31,  1921,  corporations  which 
qualified  as  personal  service  corporations 
are  taxed  in  the  same  manner  as  other 
corporations.  See  section  218(d)  of  this 
Act. 

(c)  Same  provisions  as  section  205(c) 
of  1918  Act  with  such  changes  as  are 
necessary  to  make  the  subdivision  ap- 
plicable to  fiscal  years  ending  in  1921 
and  1922  but  no  reference  is  made  to 
subdivision  (b)  of  section  218  and  the 
provision  relating  to  personal  service 
corporations  is  omitted. 

Section  206. — Capital  Gain. 


The  provisions  of  the  Act  relating  to 
capital  gain  and  capital  loss  are  new. 
The  tax  upon  "capital  net  gain"  shall, 
at  the  election  of  the  taxpayer,  be  com- 
puted under  this  section  at  the  rate 
of  12^  per  cent  of  such  "capital  net 
gain,"  instead  of  under  sections  210 
and  211  with  the  condition  that  if  the 
taxpayer  elects  to  have  the  tax  upon 
capital  net  gain  computed  under  this  sec- 
tion, the  total  tax  upon  his  total  net 
income  shall  in  no  case  be  less  than  12^ 
per  cent  of  his  total  net  income.  This 
section  applies  only  to  transactions  after 
December  31,  1921,  and  is  not  applicable 
to  corporations. 

Part  II. — Individuals. 

Section  210. — Normal  Tax. 

The  rate  of  normal  tax  in  the  case  of 
individuals  is  the  same  as  specified  in 
the  1918  Act  for  1919  and  subsequent 
years. 

Section  211. — Surtax. 

(a)l  The  surtax  rates  for  the  calendar 
year  1921  are  the  same  as  the  rates  in 
section  211(a)  of  the  1918  Act. 


(a)2  The  surtax  for  1922  and  subse- 
quent years  begins  with  a  tax  of  1  per 
cent  of  the  amount  by  which  the  net 
income  exceeds  $6,000  and  does  not  ex- 
ceed $10,000  and  increases  gradually  to 
a  maximum  rate  of  50  per  cent  of  the 
amount  by  which  the  net  income  exceeds 
$200,000. 

(b)  Same  limitation  for  1921  as  pro- 
vided in  section  211(b)  of  1918  Act  but 
for  1922  and  subsequent  years  the  tax 
imposed  by  this  section  attributable  to 


1918. 


1921. 


strated  by  prospecting  or  exploration 
and  discovery  work  done  by  the  tax- 
payer, shall  not  exceed  20  per  cent  of 
the  selling  price  of  such  property  or 
interest. 

Section    212. — Net    Income    Defined, 


(a) 

(b),  paragraph  1. 

(b),  paragraph  2, 

Section  213. — Gross  Income  Defined. 
(a) 


(b)l .  Proceeds  of  life  insurance  policies 
paid  upon  the  death  of  the  insured  to  in- 
dividual beneficiaries  or  to  the  estate  of 
the  insured  are  exempt  from  tax. 


(b)2. 
(b)3. 
(b)4. 


No  similar  provision.     See  article  77 
of  Re2:ulations  45. 


(b)5. 
(b)6. 
(b)7. 


such  bona  fide  sales  shall  not  exceed  16 
per  cent  of  the  selling  price  of  such 
property  or  interest. 


Section    212. — Net    Income    of    Indi- 
viduals Defined. 

(a)  Same  as  section  212(a)  of  1918  Act. 

(b)  Same  as  paragraph  1  of  section 
212(b)  of  1918  Act. 

(c)  Same  as  paragraph  2  of  section 
212(b)  of  1918  Act. 

Section  213. — Gross  Income  Defined. 

(a)  Same  as  section  213(a)  of  1918  Act 
except  the  last  sfentence  in  which  the 
following  is  added;  "  (except  as  p  ovided 
in  subdivision  (e)  of  eection  20i)." 

(Subdivision  (e)  of  section  201  requires 
that  a  taxable  distribution  by  a  corpora- 
tion shall  be  included  by  the  distribu- 
tees in  their  gross  income  as  of  the  date 
when  made  unqualifiedly  subject  to  their 
demands.) 

(b)l.  Proceeds  of  Ufe  insurance  policies 
paid  upon  the  death  of  the  insured  are 
exempt  from  tax.  Under  this  subdivi- 
sion, proceeds  of  life  insurance  policies 
paid  to  a  corporate  beneficiary  are 
exempt. 

(b)2.  Same  as  section  213(b)2  of  1918 
Act. 

(b)3.  Same  as  section  213(b)3  of  1918 
Act. 

(b)4.  Same  as  section  213(b)4  of  1918 
Act  except  as  follows: 

(1)  Provision  requiring  taxpayers  to 
submit  in  their  returns  a  statement  show- 
ing ownership  of  obligations,  securities 
and  bonds  enumerated  in  clauses  (a), 
(b),  (c),  and  (d)  is  omitted. 

(2)  In  the  sentence  relating  to  obliga- 
tions of  the  United  States  issued  after 
September  1,  1917,  there  is  inserted  the 
phrase  "(other  than  postal  savings  cer- 
tificates of  deposit),"  and  in  the  last 
part  of  the  sentence  reference  to  titles  of 
the  1918  Act  is  changed  to  "income,  war 
profits  and  excess  profits  taxes." 

(See  section  1328  for  exemption  of 
interest  on  Liberty  bonds  and  Victory 
notes.) 

(b)5.  Same  as  section  213(b)5  of  1918 
A.ct. 

(b)6.  Same  as  section  213(b)6  of  1918 
Act. 

(b)7.  Same  as  section  213(b)7  of  1918 
Act   except   for   the   insertion   after  the 


1918. 


1931. 


(b)8.  Exemption  of  salary  or  compen- 
eation  in  the  amount  of  $3,500  received 
by  persons  in  military  or  naval  forces 
of  United  States. 

No  similar  provision. 


word   "intended,"   the  following: 
shall  not  be  construed.". 
No  similar  provision. 


'and 


No  similar  provision,  but  in  accordance 
with  the  provisions  of  the  War  Risk  In- 
surance Act,  the  following  provision  was 
inserted  in  article  72  of  Regulations  45: 

"Since  June  25,  19l8,  no  assessment 
©f  any  Federal  tax  may  be  made  on  any 
allotments,  family  allowances,  compen- 
sation, or  death  or  disability  insurance 
payable  under  the  War  Risk  Insurance 
Act  of  September  2,  1914,  as  amended, 
even  though  the  benefit  accrued  before 
that  date." 

Compensation,  including  besides 
money  payments,  the  value  of  courses 
pursued  and  books,  material,  etc., 
which  are  furnished  free  and  become  the 
property  of  the  recipients,  and  are  not 
included  in  the  cost  of  courses,  paid  to 
or  in  behalf  of  discharged  soldiers,  sailors, 
or  members  of  the  Army  and  Navy 
Nurse  Corps  under  the  provisions  of  the 
Vocational  Rehabilitation  Acts  and 
amendments  thereto  is  taxable  income. 
(Sol.  Op.  97,  C.  B.  4,  p.  79.) 

Pensions  paid  by  the  United  States 
are  income  to  the  recipients.  (Art.  32, 
Reg.  45.) 

All  income  derived  from  investments 
in  I)uilding  and  loan  associations  is 
taxable. 


A  minister  of  the  gospel  is  required  to 
include  in  gross  income  the  rental  value 
of  the  parsonage  furnished  to  him  for 
living  quarters  in  addition  to  his  com- 
pensation.    (O.  D.  862,  C.  B.  4,  p.  85.) 

No  similar  provision. 


(b)8.  The  exemption  from  taxation 
applies  to  income  of  a  nonresident  alien 
or  a  foreign  corporation  which  consists 
exclusively  of  earnings  from  the  oper- 
ation of  a  ship  or  ships  documented 
under  the  laws  of  a  foreign  country 
which  grants  an  equivalent  exemption 
to  United  States  citizens  and  to  corpo- 
rations organized  in  the  United  States. 

(b)9.  Tne  following  items  are  exempt 
xmder  subdivision  (b)9: 

(1)  Amounts  received  as  compensa- 
tion, family  allotments,  and  allowances 
under  the  provisions  of  the  War  Risk 
Insuiance  and  the  Vocational  Rehabili- 
tation Acts. 


(2)  Pensions  from  the  United  States 
for  service  of  the  beneficiary  or  another 
in  the  military  or  naval  forces  of  the 
United  States  in  time  of  war. 

(b)10.  The  exemption  from  taxation 
applies  to  so  much  of  the  amount  re- 
ceived by  an  individual  after  December 
31,  1921,  and  before  January  1,  1927,  as 
dividends  or  interest  from  domestic  build- 
ing and  loan  associations,  operated  ex- 
clusively for  the  purpose  of  making  loans 
to  members,  as  does  not  exceed  $300. 

(b)ll.  The  rental  value  of  a  dwelling 
house  and  appurtenances  thereof  fur- 
nished to  a  minister  of  the  gospel  as  part 
of  his  compensation  is  exempt  from  tax. 

(b)12.  The  exemption  from  taxation 
applies  to  the  receipts  of  shipowners' 
mutual  protection  and  indemnity  asso- 
ciations, not  organized  for  profit,  and  no 
part  of  the  net  earnings  of  which  inures 
to  the  benefit  of  any  private  stockholder 
or  member  but  such  corporations  shall  bo 


1918. 


1921. 


(c)  See  section  217  for  comparison  with 
respect  to  items  which,  under  this  sub- 
division, are  classified  as  income  from 
sources  within  the  United  States. 


Section  214. — Deductions  Allowed. 


(a)l.  There  is  no  specific  provision  in 
the  Act  with  respect  to  traveling  ex- 
penses. See  Article  292  of  Regulations 
45. 


(a)2. 

Interest  on  indebtedness  incurred  or 
continued  to  purchase  or  carry  obliga- 
tions of  the  United  States  issued  after 
September  24,  1917,  is  deductible  pur- 
suant to  the  general  rule. 

Interest  paid  by  a  nonresident  alien 
individual  is  deductible  in  the  proportion 
that  his  gross  income  from  sources  within 
the  United  States  bears  to  his  gross  in- 
come from  all  sources. 

(a)3. 

No  similar  provision.  Such  taxes  paid 
by  a  corporation  for  its  shareholders  are 
deductible  by  the  shareholders  but  must 
be  included  in  gross  income  as  additional 
dividends.     Article  56G,  Regulations  45, 

No  similar  provision. 


For  taxes  deductible  by  nonresident 
alien  individual,  see  comparison  under 
subdivision  (b). 


(a)4. 
(a)5. 

Losses  sustained  by  nonresident  alien 
individuals  on  transactions  entered  into 
for  profit  but  not  connected  with  the 
trade  or  business,  are  deductible  only  as 
to  transactions  within  the  United  States. 


subject  as  other  persons  to  the  tax  upon 
their  net  income  from  interest,  dividends, 
and  rents. 

(c)  The  gross  income  of  a  nonresident 
alien  individual  under  both  Acts  means 
only  the  gross  income  from  sources  within 
the  United  States.  See  section  217  for 
classification  of  specific  items  as  income 
from  sources  within  or  without  the  United 
States. 

Section  214. — Deductions  Allowed 
Individuals, 

(a)l.  Same  as  section  214(a)l  of  1918 
Act  except  that  traveling  expenses  (in- 
cluding the  entire  amount  expended  for 
meals  and  lodging)  while  away  from  home 
in  pursuit  of  a  trade  or  business  are 
deductible. 

(a)2.  Same  as  section  214(a)2  of  1918 
Act  except: 

(1)  When  interest  is  paid  on  indebted- 
ness incurred  or  continued  to  purchase  or 
carry  Victory  .S|  per  cent  notes,  the  in- 
terest is  deductible  only  in  case  such 
notes  were  "originally  subscribed  for  by 
the  taxpayer." 

(2)  The  clause  relating  to  the  amount 
of  interest  deductible  by  a  nonresident 
alien  is  omitted.  The  subject  is  covered 
in  subdivision  (b)  of  this  section.  See 
comparison  under  subdivision  (b). 

(a)3:  Same  provisions  as  section  214(a)3 
of  1918  Act  except: 

(1)  Taxes  imposed  upon  the  taxpayer 
upon  his  interest  as  shareholder  or  mem- 
ber of  a  corporation  which  are  paid  by  a 
corporation  without  reimbursement  from 
the  taxpayer  are  not  deductible. 

(2)  Estate,  inheritance,  legacy,  and 
succession  taxes  accrue  on  the  due  date 
thereof  except  as  otherwise  provided  by 
the  law  of  the  jurisdiction  imposing  such 
taxes.  (This  conforms  with  the  decision 
of  the  United  States  Supreme  Court  in 
Uniied  States  v.  Woodward,  T,  D.  3195, 
C.  B.  4,  p.  153.) 

(3)  The  provision  relating  to  taxes  de- 
ductible by  a  nonresident  alien  is  omitted 
but  the  subject  is  covered  in  subdivision 
(b)  of  this  section.  See  comparison  under 
subdivision  (b). 

(a)4.  Same  as  section  214(a)4  of  1918 
Act. 

(a)5.  Same  as  section  214(a)5  of  1918 
Act  except: 

(1)  Losses  sustained  by  a  nonresident 
alien  individual  on  transactions  entered 
into  for  profit  but  not  connected  with  the 
trade  or  business,  are  deductible  only  to 
the  extent  that  the  profit,  if  the  "trans- 
action had  resulted  in  a  profit,  would  be 
taxable  under  this  title." 


10 


1918. 


1921. 


No  similar  provision.  Losses  on  bona 
fide  sales  are  deductible  even  though  the 
taxpayer  repurchases  the  property  in  the 
succeeding  year  at  the  same  price  for 
which  sold.     (O.  D.  103,  C.  B.  1,  p.  124.) 

(a)6. 

No  similar  provision.  Losses  are  de- 
ductible in  the  year  sustained  and  must 
usually  be  evidenced  by  a  closed  or  com- 
pleted transaction.     (Art.  141,  Reg.  45.) 

No  similar  provision  but  procedure  is 
same.     (Art.  141,  Reg.  45.) 


(a)7. 

No  deduction  based  upon  additions  to 
jt  reserve  for  bad  debts  is  allowable. 


No  similar  provision. 


(a)8. 


No  similar  provision  but  procedure  is 
same.     (Art.  164,  Reg.  45.) 


(a)9. 


The  deduction  for  amortization  is  allow- 
able for  all  years  in  which  the  Act  is 
effective. 


Reexamination  of  the  return  may  or 
shall  be  made  within  three  years  after 
the  termination  of  the  "present  war." 


(a)10 

No  sJinllar  provision^ 


(2)  Jjosses  on  so-called  "wash  sales"  of 
stock  or  securities  made  after  the  passage 
of  the  Act  are  not  deductible. 


(a)6.  First  sentence  is  same  as  section 
214(a)6  of  1918  Act. 

Losses  are  deductible  only  in  the  year 
sustained  unless,  in  order  to  clearly  reflect 
the  income,  the  loss  should,  in  the  opinion 
of  the  Commissioner,  be  accounted  for  as 
of  a  different  period. 

Loss  from  damage  or  destruction  of 
property  acquired  prior  to  March  1,  1913, 
shall  bo  computed  upon  the  basis  of  ita 
fair  market  price  or  value  on  March  1, 
1913. 

(a)7.  Same  as  section  214(a)  7  of  1918 
Act  except  as  follows: 

(1)  The  Commissioner  may,  in  his  dis- 
cretion, allow  as  a  deduction  in  lieu  of 
debts  ascertained  to  be  worthless  and 
charged  off  within  the  year,  a  reasonable 
addition  to  a  reserve  for  bad  debts. 

(2)  When  satisfied  that  a  debt  is  recov- 
erable only  in  part,  the  Commissioner 
may  allow  such  debt  to  be  charged  off  in 
part. 

(a)8.  Same  as  section  214(a)8  of  1918 
Act  except  as  follows: 

In  case  of  property  acquired  prior  to 
March  1,  1913,  its  fair  market  price  or 
value  on  March  1,  1913,  shall  be  the  basis 
for  computing  the  deduction. 

(a)9.  Same  as  section  214(a)9  of  1918 
Act  except  as  foUov/s: 

(1)  Instead  of  the  term,  "present  war," 
the  words  "war  against  the  German  Gov- 
ernment" are  used. 

(2)  The  deduction  of  amortization  is 
allowable  only  for  taxable  years  ending 
before  March  3,  1924,  and  then  only  if 
claim  therefor  was  made  at  the  time  of 
filing  return  for  the  taxable  year  1918, 
1919.  1920  or  1921. 

(3)  Reexamination  of  the  return  may 
or  shall  be  made  before  March  3,  1924. 
(Except  for  the  purpose  of  certain  acts, 
resolutions,  and  proclamations,  this  date 
is  three  years  after  the  termination  of  the 
war  against  the  German  Government. 
See  Public  Resolution  No.  64,  Sixty- 
sixth  Congress,  effective  March  3,  1921.) 

(a)10.  Same  as  section  214(a)10_o_f  1918 
Act  except  for  the  following  provision: 

'  'And  provided  further,  That  such  deple- 
tion allowance  based  on  discovery  value 
shall  not  exceed  the  net  income,  com- 
puted without  allowance  for  depletion, 
from  the  property  upon  which  the  dis- 
covery is  made,  except  where  such  net 
income  so  computed  is  less  than  the  de- 
pletion allowance  based  on  cost  or  fair 
market  value  as  of  March  1,  1913;" 


n 


1918. 


1921. 


(a)ll. 


No  similar  provision. 


No    similar    proxdsion.    Procedure    is 
same.     See  article  251,  Regulations  45. 


<d)iii 


(a)  12.  Deduction  for  loss  in  inventory 
and  from  rebates. 

No  similar  provision.  See  articles  49 
and  50  of  Regulations  45. 


(b)  Nonresident  aliens  are  entitled  to 
the  deductions  allowed  by  paragraphs  1, 
3(e),  4,  7,  8,  9, 10,  and  12  of  section  214(a) 
only  if  and  to  the  extent  that  they  are 
connected  with  income  from  sources 
within  the  United  States. 

(a)2.  Interest  is  deductible  by  a  non- 
resident alien  individual  in  the  propor- 
tion that  his  gross  income  from  sources 
within  the  United  States  bears  to  his  total 
gross  income  from  all  soiu-ces  within  and 
without  the  United  States. 

(a)5.  Losses  from  transactions  entered 
into  for  profit  but  not  connected  with  the 
trade  or  business  are  deductible  only  as 
to  such  transactions  within  the  Umted 
States. 


(a)ll.  Same  as  section  214(a)ll  of  1918 
Act  except  as  follows: 

(1)  Contributions  and  gifts  to  be  de- 
ductible must  be  made  to  or  for  the  use  of 
the  recipient. 

(2)  Contributions  or  gifts  made  during 
the  taxable  year  to  or  for  the  use  of  the 
following  are  deductible  subject  to  the 
15  j)er  cent  limitation: 

(a)  The  United  States,  any  State,  Ter- 
ritory, or  any  political  subdivision  thereof, 
or  the  District  of  Columwa,  for  exclu- 
sively public  purposes. 

(6)  Any  corporation  oi^nized  and 
operated  exclusively  for  literary  piirposes, 
or  any  community  chest,  fund,  or  founda- 
tion organized  and  operated  exclusively 
for  religious,  charitable,  scientific,  liter- 
ary, or  educational  purposes,  including 
posts  of  the  American  Legion  or  the 
women's  auxiliary  units  thereof,  no  part 
of  the  net  earnings  of  which  corporations 
or  organizations  inures  to  the  benefit  of 
any  private  stockholder  or  individual. 

(3)  The  aggregate  of  contributions  or 
gifts  in  all  of  the  cases  in  subdivision 
(a)ll,  which  is  deductible  must  not  be  in 
excess  of  the  15  per  cent  limitation. 

(4)  Nonresident  alien  individuals  are 
allowed  to  deduct  (subject  to  the  15  per 
cent  limitation),  contributions  to  such 
community  chests,  funds,  or  foundations 
mentioned  in  (2)  as  are  created  in  the 
United  States. 

No  similar  provision. 

(a)12.  This  subdivision  provides  for 
cases  in  which  property  is  compulsorily 
or  involuntarily  converted  into  cash  or 
its  equivalent  by  a  taxpayer.  It  applies 
as  far  as  may  be  practicable  to  similar 
transactions  under  prior  income,  war 
profits  and  excess  profits  tax  Acts. 

(b)  The  deductions  allowable  in  the 
case  of  a  nonresident  alien  individual  are 
those  authorized  in  section  214(a),  not 
including  subdivisions  (5),  (6),  and  (11), 
only  if  and  to  the  extent  that  they  are 
connected  with  income  from  sources 
within  the  United  States. 

Interest. — The  deduction  for  interest  is 
allowed  if  and  to  the  extent  it  is  con- 
nected with  income  from  sources  within 
the  United  States. 


Losses  sustained,  if  incurred  in  any 
transaction  entered  into  for  profit,  are 
deductible  in  the  case  of  a  nonresident 
alien  individual  only  if  and  to  the  extent 
that  the  profit,  if  such  transaction  had 
resulted  in  profit,  would  be  taxable  as 
income  from  sources  within  the  United 
States. 


12 


1918. 


1931. 


(a)ll. 


No  similar  provision. 


Losses  sustained  of  property  not  con- 
nected vnth  a  trade  or  business  if  arising 
from  fires,  storms,  shipwreck  or  other 
casualty  are  deductible  by  nonresident 
alien  individuals  only  if  the  loss  is  of 
property  within  the  United  States. 

Contributions  or  gifts  by  nonresident 
aliens  are  deductible  in  the  same  cases 
and  to  the  same  extent  as  provided  in 
section  214(a)ll  of  the  1918  Act,  and  in 
addition  thereto  (subject  also  to  the  15 
per  cent  limitation)  contributions  or  gifts 
to  the  following  organizations  of  the  kind 
described  in  subdivision  (b): 

(1)  Domestic  corporation  organized  and 
operated  exclusively  for  literary  pur- 
poses. 

(2)  Community  chests,  funds  or  founda- 
tions created  in  the  United  States. 

In  the  case  of  citizens  entitled  to  the 
benefits  of  section  262,  the  deductions 
shall  be  the  same  and  shall  be  determined 
in  the  same  manner  as  in  the  case  of  a 
nonresident  alien  individual. 


Section  215.— Items  not  Deductible.     Section  215.— Items  not  Deductible. 


(a) 
(b) 
(c) 
(d) 
No  similar  provision. 


Section  216. — Credits  Allowed. 


Credits  allowed  against  net  income  for 
the  purpose  of  the  normal  tax. 

(a)  Dividends  from  a  corporation  tax- 
able under  Title  II. 

(a)  Dividends  from  personal  service 
corporation  from  earnings  or  profits  upon 
"which  income  tax  has  been  imposed. 

Covered  by  216(a).  Under  this  sub- 
division of  section  216,  dividends  from  a 
foreign  corporation  taxable  under  Title  II 
are  allowed  as  a  credit  irrespective  of  the 
amount  of  the  dividend  or  the  amount  of 
the  income  of  the  corporation  from  sources 
within  the  United  States  (T.  B.  M.  21, 
C.  B.  1,  p.  160). 


(b) 


(a)l.  Same  as  section  215(a)  of  1918  Act. 
(a)2.  Same  as  section  215(b)  of  1918  Act. 
(a)3.  Same  as  section  215(c)  of  1918  Act. 
(a)4.  Same  as  section  215(d)  of  1918  Act. 

(b)  This  subdivision  is  new  and  pre- 
scribes certain  items  wliich  may  not  be 
deducted  by  the  holder  of  a  life  or  ter- 
minable interest  acquired  by  gift,  bequest, 
or  inheritance. 

Section  216. — Credits  Allowed 
Individuals. 

Credits  allowed  against  net  income  for 
the  purpose  of  the  normal  tax. 

(a)l.  Dividends  from  a  domestic  cor- 
poration other  than  a  corporation  en- 
titled to  the  benefits  of  section  262. 

No  similar  provision.  The  provisions 
of  the  Act  dealing  with  personal  service 
corporations  are  effective  for  1921  only. 
(Sec.  218(d),  par.  2.) 

(a)2.  Dividends  from  a  foreign  cofpo- 
ration  more  than  50  per  cent  of  the  gross 
income  of  which  for  the  three-year  period 
ending  with  the  close  of  its  taxable  year 
preceding  the  declaration  of  such  divi- 
dends (or  for  such  part  of  such  period  as 
the  corporation  has  been  in  existence) 
was  derived  from  sources  within  the 
United  States  determined  as  provided  in 
section  217. 

(b)  Same  as  section  216(b)  of  1918  Act 


la 


1918. 


1921. 


(c)  Personal  exemption. 

CmZEN   OR  RESIDENT  OP  UNITED  STATES. 

Single  person $1,  000 

Head  of  a  family  or  mar- 
ried person  living  with 
husband  or  wife 2,000 


No  similar  provision. 


NONRESIDENT   ALIEN. 

No  personal  exemption  or  credit  for  de- 
pendents allov.-ed  unless  the  alien  is  a 
citizen  or  subject  of  a  country  which 
either  imposes  no  income  tax  or  in  impos- 
ing an  income  tax  allows  similar  credits  to 
citizens  of  the  United  States  not  residing 
in  such  country,  in  which  case  the  non- 
resident alien  is  entitled  to  the  same  per- 
sonal exemption  and  credit  for  depend- 
ents as  a  citizen  or  resident  of  the  United 
States.  (See  also  arts.  306  and  307, 
Reg.  45.) 

(d)  Credit  for  dependents. 

CITIZEN   OR   RESIDENT. 

For  each  dependent  as  de- 
scribed in  (d) $200 


NONRESIDENT  AUEN. 

The  credit  for  dependents  is  condi- 
tional. See  comparison  under  subdivi- 
sion  (c). 

(e)  Nonre^dent  aliens.  See  compari- 
son under  subdivision  (c). 

No  similar  provision.  Procedure  under 
1918  Act  was  similar  to  1921  Act.  See 
article  305,  Regulations  45. 


Section  217. — Nonresident  jVliens — 
Allowance  op  Deductions  and- 
Credits. 


(c)  Personal  exemption. 

citizen  or  resident  op  united  states. 

Single  person $1,  000 

Head  of  a  family  or  mar- 
ried person  living  with 
husband  or  wife: 
Net  income  not  over 

$5,000 2,500 

Net  income  in  excess 
of  $5,000 2. 000 

"  In  no  case  shall  the  reduction  of  the 
personal  exemption  from  $2,500  to  $2,000 
operate  to  increase  the  tax,  which  would 
be  payable  if  the  exemption  were  $2,500, 
by  more  than  the  amount  of  the  net  in- 
come in  excess  of  $5,000." 

NONRESIDENT   ALIEN. 

A  nonresident  alien  or  a  citizen  en- 
titled to  the  benefits  of  section  262  is  en- 
titled to  a  personal  exemption  of  $1,000 
irrespective  ol  nationality. 


(d)  Credit  for  dependents. 

CITIZEN    OR   RESIDENT. 

For  each  dependent  as  de- 
scribed in  (d) $400 

The  definition  of  a  dependent  is  the 
same  in  both  Acts. 

NONRESIDENT  ALIEN. 

A  nonresident  alien  or  a  citizen  entitled 
to  the  benefits  of  section  262  is  not  enti- 
tled to  a  credit  for  dependents. 

(e)  Nonresident  aliens  or  citizen  enti- 
tled to  benefits  of  section  262.  See  com- 
parison under  subdi\ision  (c) . 

(f)  The  credits  allowed  by  subdivi- 
sions (c),  (d),  and  (e)  are  determined  by 
the  status  of  the  taxpayer  on  the  last  day 
of  the  period  for  which  the  return  is  made. 

Section    217. — Net    Income    op    Non- 
resident !!\.LiEN  Individuals. 

Subdivisions  (a)  to  (f)  inclusive  are 
new  and  replace  among  other  items,  that 
part  of  section  213(c)  of  the  1918  Act 
which  Usts  certain  items  to  be  included 
in  gross  income  of  nonresident  aliens. 

Income  from  sources  within  United 
States  includes: 


98045"— 22- 


14 


1918. 


1931. 


No  similar  provision  in  section  217,  but 
section  213(c)  defines  ^ross  income  from 
sources  -within  the  United  States  as  in- 
cluding "interest  on  bonds,  notes,  or 
other  interest-bearing  obligations  of  resi- 
dents, corporate  or  otherwise    *    *    *." 

Article  91,  Regulations  45  provides  that 
"interest  on  deposits  in  banks  located 
within  the  United  States"  is  to  be  in- 
cluded in  the  gross  income  of  nonresident 
aliens. 

In  the  case  of  nonresidents,  all  interest 
from  residents,  corporate  or  otherwise,  is 
included  in  gross  income.   Section  213(c) . 


Not  specifically  covered  in  the  Act  but 
to  be  included  in  gross  income  under 
article  91,  Regulations  45. 

No  similar  provision. 


_  No  similar  provision  but  to  be  included 
in  gross  income  under  article  91,  Regula- 
tions 45. 

No  similar  provision  but  to  be  included 
in  gross  income  under  article  91,  Regula- 
tions 45. 


No  similar  provision. 


Covered  in  effect  by  section  214(b)  of 
the  Act  and  article  271,  Regulations  45. 


No  similar  provision. 
No  similar  proAdsion. 


(a)l.  Interest  on  bonds,  notes,  or  other 
interest-bearing  obligations  of  residents, 
corporate  or  otherwise,  but  not  includ- 


"(A)  interest  on  deposits  with  persons 
carrying  on  the  banking  business  paid  to 
persons  not  engaged  in  business  within 
the  United  States  and  not  having  an  office 
or  place  of  business  therein. 

"(B)  interest  received  from  a  resident 
alien  individual  or  a  resident  foreign  cor- 
poration when  it  is  shown  to  the  satisfac- 
tion of  the  Commissioner  that  less  than  20 
per  centum  of  the  gross  income  of  such 
resident  paj^or  has  been  derived  from 
sources  within  the  United  States,  as  de- 
termined under  the  provisions  of  this  sec- 
tion, for  the  three-year  period  ending 
with  the  close  of  the  taxable  year  of  such 
payor,  or  for  such  part  of  such  period  im- 
mediately preceding  the  close  of  such 
taxable  year  as  may  be  applicable." 

(a)2.  The  amount  received  as  divi- 
dends— 

"(A)  from  a  domestic  corporation  other 
than  a  corporation  entitled  to  the  benefits 
of  section  262. 

"(B)  from  a  foreign  corporation  unless 
less  than  50  per  centum  of  the  gross  in- 
come of  such  foreign  corporation  for  the 
three-year  period  ending  with  the  close 
of  its  taxable  year  preceding  the  declara- 
tion of  such  dividends  (or  for  such  part  of 
Buch  period  as  the  corporation  has  been  in 
existence)  was  derived  from  sources 
within  the  United  States  as  determined 
under  the  provisions  of  this  section." 

(a)3.  Compensation  for  labor  or  per- 
sonal services  performed  in  the  United 
States. 

(a)4.  "Rentals  or  royalties  from  prop- 
erty located  in  the  United  States  or  from 
any  interest  in  such  property,  including 
rentals  or  royalties  for  the  use  of  or  for 
the  privilege  of  using  in  the  United  States, 
patents,  copyrights,  secret  processes  and 
formulas,  good  will,  trade-marks,  trade 
brands,  franchises,  and  other  like  prop- 
erty." 

(a)5.  "Gains,  profits,  and  income  from 
the  sale  of  real  property  located  in  the 
United  States." 

(b)  Apportionment  and  allocation  of 
expenses,  losses,  and  other  deductions  to 
items  of  gross  income  in  subdivision  (a). 

(c)  Items  treated  as  income  from 
sources  without  the  United  States. 

(d)  Apportionment  and  allocation  of 
expenses,  losses,  and  deductions  to  items 
of  gross  income  in  subdivision  (c). 


15 


1918. 

No  similar  provision. 


N  )  similar  provision.  See  opinion  of 
the  Attorney  General  (T.  D.  3111,  C.  B. 
4,  p  280). 


No  similar  provision. 
Section  217. 


1921. 

(e)  Allocation  or  apportionment  of 
items  of  gross  income,  expenses,  losses, 
and  deductions  other  than  those  specified 
in  subdivisions  (a)  and  (c);  gross  income 
partly  from  sources  within  and  partly 
from  sources  without  the  United  States; 
and  gains,  profits  and  income  from  (1) 
transportation  or  other  services  rendered 
partly  within  and  partly  without  the 
United  States,  and  (2)  from  the  sale  of 
personal  property  produced  (in  whole  or 
in  part)  by  the  taxpayer  and  sold  ^vithout 
the  United  States,  or  produced  (in  whole 
or  in  part)  by  the  taxpayer  without  and 
sold  within  the  United  States. 

Treatment  of  gains,  profits,  and  income 
from  the  purchase  of  personal  property 
within  and  its  sale  without  the  United 
States  or  from  the  purchase  of  personal 
property  without  and  its  sale  within  the 
United  States. 


(f)  Definition    of 
duced." 


'sale"    and    "pro- 


(g)  Same  as  section  217  of  1918  Act 
except  for  the  addition  of  (1)  the  words 
"citizen  entitled  to  the  benefits  of  section 
262",  necessary  changes  on  account  of 
nonresident  aUens  being  allowed  no  credit 
for  dependents,  and  (2)  the  words  "or 
foreign  trader". 


Section  218. — Partnerships  and  Per- 
sonal Service  Corporations. 

(a)  Paragraph  1. 

(a)  Paragraph  2. 

(b)  Different  tax  rates  appKcable  dur- 
ing fiscal  year  of  partnership. 

(c)  Credit  against  partner's  net  income 
for  proportionate  part  of  partnership 
profits  tax  for  fiscal  year  ended  in  1918. 

(d) 

(e) 


Under  the  1918  Act,  a  member  of  a  per- 
sonal service  corporation  with  a  fiscal 
year  ended  in  1918  was  subject  to  normal 
tax  and  surtax  upon  his  distributive  share 
of  the  earnings  of  the  corporation  attrib- 
utable to  the  part  of  its  fiscal  year  falling 
within  1918,  and  to  surtax  only  upon  his 
distributive  share  of  its  earnings  attrib- 
utable to  the  part  of  its  fiscal  year  falling 
within  1917.  See  article  332,  Regula- 
tions 45  and  section  205  of  the  Act,  last 
clause  o/  subdivision  (c). 


Section  218. — Partnerships  and  Per- 
sonal Service  Corporations. 

(a)  Same  as  section  218(a),  paragraph  1 
of  1918  Act. 

(b)  Same  as  section  218(a),  paragraph  2 
of  1918  Act. 

No  similar  provision  in  this  section. 
See  section  205(c). 

.     No    similar    provision.     Inapplicable 
under  1921  Act. 

(c)  Same  as  section  218(d)  of  1918  Act. 

(d)  Paragraph  1.  Same  as  section 
218(e)  of  1918  Act. 

(d)  Paragraph  2.  Subdivision  (d),  par- 
agraphs 1  and  2  ineffective  after  Decem- 
ber 31,  1921. 

Provision  made  for  taxing  distributive 
share  of  member  of  personal  service  cor- 
poration for  part  of  fiscal  year  falling 
within  1921.     See  section  205(c)l. 


u 


1918. 

Section  219. — Estates  and  Trusts. 

(a) 
(b) 


The  phrase  "for  exclusively  public 
purposes  "  does  not  appear  in  subdivision 
(b). 


Amounts  paid  to  or  permanently  set 
aside  for  the  special  fund  for  vocational 
rehabilitation  are  not  deductible. 

(c) 


(d) 


No  similar  provisions.  Similar  cases 
are  treated  as  coming  under  article  347, 
Regulations  45.  • 


Under  the  1918  Act  the  income  of  such 
trusts  was  taxable  either  to  the  trust  or 
the  corporation,  dependent  upon  the 
measure  of  control  exercised  by  the  cor- 
poration over  the  trust. 


Section  220. — Profits  op  Corporation 
Taxable  to  Stockholders. 

Corporations  coming  within  the  provi- 
sions of  this  section  are  subject  to  profits 
tax  but  not  to  the  income  tax  under  sec- 
tion 230,  but  the  stockholders  are  subject 
to  tax  upon  their  distributive  shares  of  the 
net  income  of  the  corporation  (after  de- 
ducting the  profits  tax  under  Title  III) 
in  the  same  manner  as  the  members  of  a 
personal  service  corporation.  No  option 
as  to  manner  of  taxing  is  allowable. 


1921. 


Section  219. — Estates  and  Trtjsts. 

(a)  Same  as  section  219(a)  of  1918  Act. 

(b)  Changes  made  in  deductions  al- 
lowed under  section  214(a)ll  in  comput- 
ing net  income  of  estate  or  trust — 

(1)  Amounts  paid  or  permanently  set 
aside  for  the  use  of  the  United  States,  any 
State,  Territory,  or  any  political  subdi- 
vision thereof,  or  the  District  of  Columbia, 
must  be   "for   exclusively  public  pur- 

.  poses." 

(2)  Amounts  paid  to  or  permanently 
set  aside  for  the  special  fund  for  voca- 
tional rehabilitation  are  deductible. 

(c)  Language  changed  so  as  to  include 
in  addition  to  "cases  under  paragraphs 
(1),  (2),  or  (3)  of  subdivision  (a)",  "any 
other  case  within  subdivision  (a)  of  this 
section  except  paragraph  (4)." 

(d)  Slight  change  in  language  from  that 
used  in  section  219(d)  of  1918  Act. 

(e)  This  subdivision  is  new  and  speci- 
fies who  shall  make  returns  and  pay  the 
tax  in  cases  of  estates  and  trusts  which 
have  income  of  the  class  described  in  sec- 
tion 219(a)4,  and  also  other  income;  in 
other  words,  estates  and  trusts  which  can 
not  be  treated  as  a  unit.  The  subdivi- 
sion, in  substance,  is  similar  to  article  347 
of  Regulations  45. 

(f)  This  subdivision  is  new  and  ex- 
empts from  taxation  as  a  trust  under  sec- 
tion 219,  a  trust  created  by  an  employer 
as  a  part  of  a  stock  bonus  or  profit  sharing 
plan  for  the  exclusive  benefit  of  some  or 
all  of  his  employees,  to  which  contribu- 
tions are  made  by  employer  or  employees 
or  both. 

Section  220. — Evasion  of  Surtaxes  by 
Incorporation. 

A  corporation  coming  within  the  pro- 
visions of  this  section  is  subject  to  the  tax 
imposed  by  section  230  and  in  addition 
thereto,  a  tax  of  25  per  cent  of  its  net  in- 
come, which  additional  tax  is  subject  to 
the  same  provisions  of  law  as  the  tax  im- 
posed by  section  230:  Provided,  however, 
that  if  all  the  stockholders  or  members  of 
the  corporation  agree  thereto,  they  shall 
be  taxed  upon  their  distributive  shares  of 
the  net  income  of  the  corporation  in  the 
same  manner  as  provided  in  section  218 
in  the  case  of  members  of  a  partnership. 
The  corporation  itself  will  then  be  subject 
to  no  income  or  profits  tax  for  the  taxable 
year  in  question. 


17 


1918. 


1921. 


Section    221. — Payment    op    Tax    a^* 
Source. 

(a) 

Interest  on  deposits  in  banks  located 
in  the  United  States  is  taxable  to  non- 
resident aliens  (art.  91,  Reg.  45)  and  sub- 
ject to  withholding. 


Dividends  from  corporations  subject  to 
tax  under  Title  II  are  not  subject  to 
withholding. 

Subdivision  (a)  applies  only  to  non- 
resident alien  individuals. 

(b) 

(c) 
(d) 
(e) 

Section  222. — Ciiedit  for  Taxes. 


(a)l  A  citizen  of  the  United  States  is 
allowed  as  a  credit  against  his  tax  under 
Part  II  of  Title  II,  the  amount  of  income, 
war  profits  and  excess  profits  taxes  paid  to 
ft  foreign  country  upon  income  derived 
from  sources  therein,  or  to  a  possession  of 
the  United  States. 

(a)2 

(a)3  The  credit  allowed  to  an  alien 
resident  of  the  United  States  is  for  only- 
such  taxes  as  are  paid  to  the  country  of 
which  he  is  a  citizen  or  subject. 


(a)4 

No  similar  provisions.  When  a  credit 
for  tajfes  is  allowable  the  entire  amount  of 
the  tax  may  be  credited. 


Section  221. — Payment  op  Individual's 
Tax  at  Source. 

(a)  Changes: 

(1)  Interest  on  deposits  with  persons 
carrying  on  the  banking  business  paid  to 

Bersons  not  engaged  in  business  in  the 
nited  States  and  not  having  an  office  or 
place  of  business  therein,  is  not  subject 
to  withholding.  Such  interest  so  paid  is " 
not  subject  to  tax  in  the  hands  of  non- 
resident aliens.  See  section  213(c)  and 
section  217(a)(1)(A). 

(2)  Only  such  dividends  as  are  allowed 
as  a  credit  under  section  216(a)  are  not 
subject  to  withholding. 

(3)  Withholding  is  required  in  the  case 
of  a  "partnership  composed  in  whole  or 
in  part  of  nonresident  aliens." 

(b)  Same  provisions  as  section  221(b) 
of  1918  Act. 

(c)  Same  as  section  221(c)  of  1918  Act. 

(d)  Same  as  section  221(d)  of  1918  Act. 

(e)  Same  as  section  221(e)  of  1918  Act. 

Section    222. — Credit    for    Taxes    in 
Case  op  Individuals. 

(a)l  Same  as  section  222(a)l  of  1918  Act 
except  for  the  omission  of  the  words 
"upon  income  derived  from  sources 
therein." 


(a)2  Same  as  section  222(a)2  of  1918 
Act. 

(a)3  Changed  so  that  an  alien  resident 
of  the  United  States  may,  if  the  country 
of  which  he  is  a  citizen  or  subject  allows 
a  similar  credit  to  citizens  of  the  United 
States  residing  in  such  country,  credit 
the  amount  of  his  tax  due  to  the  United 
States  with  the  amount  of  tax  paid  to 
any  foreign  country. 

(a)4  Same  as  section  222(a)4  of  1918 
Act. 

(a)5  This  subdivision  is  new  and  pro- 
vides that  a  citizen  entitled  to  the  bene- 
fits of  section  262  shall  not  be  allowed  the 
credits  specified  in  section  222(a)l,  2,  3, 
and  4.  It  also  limits  the  amount  of  the 
credit  in  all  cases  to  an  amount  not  in 
excess  of  the  same  proportion  of  the  tax, 
against  which  such  credit  is  taken,  which 
the  taxpayer's  net  income  (computed 
without  deduction  for  any  income,  war 
profits  and  excess  profits  taxes  imposed 
by  any  foreign  country  or  possession  of 
the  United  States)  from  sources  without . 
the  United  States  bears  to  his  entire  net 
income  (computed  without  such  deduc- 
tion) for  the  same  taxable  year. 


m 


1918. 


f^ 


(c)  A  taxpayer  claiming  credit  under 
this  section  for  taxes  paid  is  required  to 
show,  by  evidence  satisfactory  to  the 
Commissioner,  his  income  from  sources 
within  the  country  or  possession  of  the 
United  States  with  respect  to  which  the 
credit  for  taxes  paid  is  claimed. 

No  similar  provision. 


Section  223. — Individual  Returns. 
Paragraph  1. 


No  return  required  unless  net  income 
equals  or  exceeds  $1,000  or  $2,000  as  the 
case  may  be. 

If  the  a.^gregate  net  income  of  husband 
and  wife  living  together  equals  or  exceeds 
$2,000,  separate  returns  are  required 
imless  the  income  of  each  is  included  in 
a  single  joint  return. 


No  similar  provision  in  the  Act  but 
procedure  is  same.  See  Sol.  Op.  90, 
C.  B.  4,  p.  236. 

Paragraph  2. 
Section   224. — Partnership   Returns. 


Section  225. — Fiduciary  Returns. 


Section  226. — Returns  When  Account- 
ing Period  Changed. 

Paragraph  1. 


Paragraph  2,  clause  1. 

In  computing  the  tax  in  case  of  a  return 
for  a  period  of  less  than  twelve  months, 
the  credits  provided  in  Bubdi\isions  (c) 
and  (d)  of  section  216  are  reduced  respec- 
Uvely  to  the  appropriate  fractional  parts 


1931. 

^b)  Same  as  section  222(b)  of  1918  Act. 
(c)  Changed  so  as  to  require  a  taxpayer 
claiming  credit  under  this  section  for 
taxes  paid,  to  show,  by  e\ddence  satis- 
factory to  the  Commissioner,  his  income 
from  sources  vnthout  the  United  States. 


(d)  This  subdivision  is  new  and  makes 
pro\ision  for  computation  of  credits  in 
case  of  returns  for  fiscal  years  ended  in 
1921  and  disallowance  by  the  Commis- 
sioner of  such  credit  claimed  as  has 
already  been  taken  by  the  taxpayer. 

Section  223. — Individual  Returns. 

(a)l  and  2.  Same  provisions  as  first 
sentence  of  paragi-aph  1,  section  223  of 
1918  Act. 

(a)3.  Every  individual  having  a  gross 
income  of  $5,000  or  more  during  the  tax- 
able year  must  filfe  a  return  regardless  of 
the  amount  of  his  net  income. 

(b)  Same  provisions  as  second  sentence 
of  paragraph  1,  section  223,  1918  Act  and 
in  addition  thereto  either  separate  returns 
or  a  single  joint  return  are  required  from 
husband  and  wife  living  together  if  their 
aggregate  gross  income  for  the  taxable 
year  is  $5,600  or  more. 

When  husband  and  wife  file  a  single 
joint  return,  the  tax  shall  be  computed 
on  their  aggregate  income. 

(c)  Same  as  paragraph  2  of  section  223, 
1918  Act. 

Section   224. — Partnership   Returns. 

Same  as  section  224  of  1918  Act. 

Section  225. — Fiduciary  Returns. 

Same  provisions  as  in  section  225  of  1918 
Act  and  in  addition  thereto  a  fiduciary  is 
required  to  file  a  return  in  any  case  where 
he  acts  for  an  individual  having  a  gross 
income  of  $5,000  or  more  for  the  taxable 
year. 

Section  226. — Returns  for  a  Period 
OF  Less  Than  Twelve  Months. 

(a)  Same  as  first  paragraph  of  section 
226  of  1918  Act  except  for  omission  of  last 
sentence  of  that  paragraph. 

(b)  Same  provisions  as  first  clause  of 
paragraph  2,  section  226  of  1918  Act. 

(c)  This  subdivision  provides  for  com- 
puting the  tax  in  the  case  of  a  return  for  a 
period  of  less  than  twelve  months  by 
placing  the  net  income  upon  an  annual 
basis,  computing  the  tax  upon  such  net 


19 


1918. 

of  the  total  credits  provided  in  those  sub- 
divisions and  the  tax  computed  upon  the 
net  income  for  the  period  aa  reduced  by 
such  credits. 

Section    227. — Time    and    Place    for 
Filing  Return. 


All  calendar  year  returns  are  required 
to  be  filed  on  or  before  March  15,  and  fiscal 
year  returns  on  or  before  the  fifteenth  day 
of  the  third  month  following  the  close  of 
the  fiscal  year. 


Section  228. — ^Understatement  in 
Returns. 


Section  330,  paragraph  3. 


Part  III. — Corporations. 

Section   230. — ^Tax   on   Corporations. 

(a)  Rates  of  tax: 

1918 — 12  per  cent  of  net  income  in 

excess  of  credits. 
1919  and  1920—10  per  cent  of  net 

income  in  excess  of  credits. 

(b)  Allocation  of  tax  on  transportation 
corporations. 

Section  231. — Conditional  and  Other 
•Exemptions. 

(1),  (2),  (3). 

(4)  The  Act  in  general  terras  exempts 
domestic  building  and  loan  as.sociatiou8. 
See  article  515  of  Regulations  45  as 
amended  by  T.  D.  3179. 


(5)  Cemetery  companies  owned  and 
operated  exclusively  for  the  benefit  of 
their  members  are  exempt.  See  also  Sol. 
Op.  120  (C.  B.  5,  p.  201)  in  which  it  is  held 
that  a  cemetery  company  is  not  exempt 
unless  owned  and  operated  exclusively 
for  the  benefit  of  all  lot  owners. 


1921. 

income  and  taking  the  appropriate  frac- 
tional part  of  the  tax  so  computed. 


Section  227. — Time  and  Place  for 
Filing  Individual,  Partnership,  and 
Fiduciary  Returns. 

Same  as  section  227  of  1918  Act  except 
that  in  the  case  of  nonresident  aliens,  cal- 
endar year  returns  are  to  be  filed  on  or  be- 
fore June  15,  and  fiscal  year  returns  on  or 
before  the  fifteenth  day  of  the  sixth  month 
following  the  close  of  the  fiscal  year. 

Section  228. — Understatement  in 
Returns. 

Same  as  section  228  of  1918  Act. 

Section  229. — Incorporation  op  Indi- 
vidual OR  Partnership  Bu.sine8s. 

This  section  contains  the  same  provi- 
sions as  the  third  paragraph  of  section  330 
of  the  1918  Act,  appropriate  changes  in 
dates,  etc.,  having  been  made  so  aa  to 
make  the  section  applicable  to  1921  and 
part  of  1922. 

Part  ni. — Corporations. 

Section  230. — Tax  on  Corporations. 

(a)  Rates  of  tax: 

1921 — 10  per  cent  of  net  income  in 

excess  of  credits. 
1922    and    subsequent    years — 12 J 

per  cent  of  net  income  in  excess 

of  credits. 

Eliminated  from  1921  Act. 


Section  231. — Conditional  and  Other 
Exemptions  of  Corpor.a.tions. 

(1),  (2)  and  (3).  Same  as  section  231 
(1),  (2),  and  (3)  of  1918  Act. 

(4)  Exemption  of  domestic  building  and 
loan  associations  limited  to  those  "sub- 
stantially all  business  of  which  is  con- 
fined to  making  loans  to  members.'' 
The  exemption  of  cooperative  banks  ia 
same  as  in  1918  Act. 

(5)  The  exemption  of  cemetery  com- 
panies is  the  same  as  under  section  231(5) 
of  the  1918  Act,  and,  in  addition,  applies 
to  those  "which  are  not  operated  for 
profit  and  to  any  corporation  chartered 
solely  for  burial  purposes  as  a  cemetery 
corporation  and  not  permitted  by  its 
charter  to  engage  in  any  business  not 
necessarily  incident  to  that  purpose,  no 


20 


1918. 


(6) 


(7) 
(8) 
(9) 
(10) 

(11) 


1931. 

part  of  the  net  earnings  of  which  inures  to 
the  benefit  of  any  private  stockholder  or 
individual." 

(6)  Same  as  section  231(6)  of  1918  Act, 
and  exemption  from  taxation  is  extended 
also  to  corporations  organized  and  oper- 
ated exclusively  for  literary  purposes,  and 
to  any  community  chest,  fund  or  founda- 
tion organized  and  operated  exclusively 
for  religious,  charitable,  scientific,  liter- 
ary, or  educational  purposes,  no  part  of  the 
net  earnings  of  which  corporation,  com- 
munity chest,  fund,  or  foundation  inures 
to  the  benefit  of  any  private  stockholder 
or  individual. 

(7)  Same  as  section  231(7)  of  1918  Act. 

(8)  Same  as  section  231(8)  of  1918  Act. 

(9)  Same  as  section  231(9)  of  1918  Act. 

(10)  Same  as  section  231(10)  of  1918  Act. 

(11)  Same  as  section  231(11)  of  1918 
Act  and  exemption  from  taxation  is  ex- 
tended also  to  f armera' ,  fruit  growers'  or 
like  associations  organized  and  operated 
as  purchasing  agents  for  the  purpose  of 
purchasing  supplies  and  equipment  for 
the  use  of  members  and  turning  over  such 
supplies  and  equipment  to  such  members 
at  actual  cost,  plus  necessary  expenses. 

(12)  Same  as  section  231(12)  of  1918 
Act. 

(13)  Same  as  section  231(13)  of  1918 
Act. 

(14)  Personal  service  corporations  are 
exempt  only  for  1921. 

Section   232. — Net    Income    of    Cor- 
porations  Defined. 

Same  as  section  232  of  1918  Act  except 
for  the  provision  that  in  the  case  of  a  for- 
eign corporation  or  of  a  corporation  en- 
titled to  the  benefits  of  section  262,  net 
income  shall  be  computed  in  the  manner 
provided  in  section  217. 

Section  233. — Gross  Income  Defined.      Section  233. — Gross   Income   op  Cor- 
porations Defined. 


(12) 
(13) 

(14)  Personal  service  corporations  are 
exempt  for  1918,  1919  and  1920. 

Section  232. — Net  Income  Defined. 


(a)  "Gross  income"  means  the  gross 
income  as  defined  in  section  213,  with 
certain  exceptions  as  to  life  insurance 
companies  and  mutual  marine  insurance 
companies. 


(b)  The  gross  income  of  a  foreign  cor- 
poration means  only  the  gross  income  from 
sources  within  the  United  States.  See 
comparison  under  section  217  for  treat- 
ment of  items  mentioned  specifically  to 
be  included  in  gross  income. 


(a)  "Gross  income' '  means  the  gross  in- 
come as  defined  in  section  213  and  sec- 
tion 217  with  the  same  exception  as  to 
mutual  marine  insurance  companies  as 
in  section  233(a)2  of  the  1918  Act.  See 
sections  242,  243,  244,  and  245  for  com- 
parison of  tax  on  life  insurance  com- 
panies. 

(b)  The  gross  income  of  a  foreign  cor- 
poration (except  in  the  case  of  insurance 
companies  subject  to  the  tax  imposed  by 
sees.  243  or  246)  means  only  the  gross  in- 
come from  sources  within  the  United 
States  determined  as  provided  in  section 
217. 


^if 


1918. 


1921. 


Section  234. — Deductions  Allowed. 


(a)l. 

(a)2. 

Interest  on  indebtedness  incurred  or 
continued  to  purchase  or  carry  obliga- 
tions of  the  United  States  issued  after 
September  24,  1917,  is  deductible  pur- 
suant to  the  general  rule. 

Interest  paid  by  a  foreign  corporation 
is  deductible  in  the  proportion  that  its 
gross  income  from  sources .  within  the 
United  States  bears  to  its  gross  income 
from  all  sources. 

(a)3. 

No  similar  provision.  "The  amount  of 
income  tax  paid  for  a  bondholder  by  an 
obligor  pursuant  to  a  tax-free  covenant 
in  its  bonds  is  in  the  nature  of  additional 
interest  paid  the  bondholder  and  must  be 
included  in  his  gross  income."  (Art.  31, 
Reg.  45.) 

No  similar  provision.  "Banks  paying 
taxes  assessed  against  their  stockholders 
on  account  of  their  ownership  of  the 
shares  of  stock  issued  by  such  banks  can 
not  deduct  the  amount  of  taxes  so  paid. 
*  *  *  Such  payments  by  banks  or 
other  corporations  are  regarded  as  in  the 
nature  of  additional  dividends  and  must 
be  included  by  the  stockholder  in  his 
dividends  received  but  he  may  deduct 
from  gross  income  the  taxes  so  paid  in 
his  behalf."     (Art.  566,  Reg.  45.) 

No  similar  provision. 


Section 


234. — Deductions 
Corporations. 


Allowed 


(a)4. 


No  similar  provision.  Losses  are  de- 
ductible in  the  year  sustained  and  must 
usually  be  evidenced  by  closed  or  com- 
pleted transactions.  (Art.  141,  Reg.  45, 
as  amended.) 

No  similar  provision.  I-X)sse8  on  bona 
fide  sales  of  stock  or  securities  are  deduc- 
tible even  though  the  taxpayer  repur- 
chases the  stock  or  securities  in  the  suc- 
ceeding year  at  the  same  price  for  which 
sold.  (O.  p.  103,  C.  B.  1,  p.  124.) 
,  No  similar  provision.  Procedure  is 
same.     (Art.  141,  Reg.  45,  as  amended.) 


(a)l.  Same  as  section  234(a)l  of  1918 
Act 

(a)2.  Same  as  section  234(a)2  of  1918 
Act  except: 

(1)  When  interest  is  paid  on  indebted- 
ness incurred  or  continued  to  purchase  or 
carry  Victory  3i  per  cent  notes,  the  in- 
terest is  deductible  only  in  case  such  notes 
were  "originally  subscribed  for  by  the 
taxpayer." 

(2)  The  clause  relating  to  the  amount 
of  interest  deductible  by  a  foreign  cor- 
poration is  omitted.  The  subject  is  cov- 
ered in  subdivision  (b)  of  this  section. 
See  comparison  under  subdivision  (b). 

(a)3.  Same  provisions  as  section  234(a)3 
of  1918  Act  except  as  follows: 

(1)  The  amount  of  tax  withheld  and 
paid  by  obligors  specified  in  section 
221(b)  for  bondholders  in  pursuance  of  a 
tax-free  covenant  need  not  be  included  in 
gross  income  by  the  obligee. 


(2)  Taxes  imposed  upon  a  shareholder 
or  member  of  a  corporation  upon  his  in- 
terest in  such  corporation,  which  are  paid 
by  the  corporation  for  the  shareholder  or 
member  without  reimbursement  from 
him  may  be  deducted  by  the  corporation 
but  not  by  the  shareholder  or  member. 


(3)  Estate,  inheritance,  legacy,  or  suc- 
cession taxes  accrue  on  the  auo  date 
thereof  except  as  otherwise  provided  by 
the  law  of  the  jurisdiction  imposing  such 
taxes.  (This  conforms  with  the  decision 
of  the  United  States  Supreme  Court  in 
United  States  v.  Woodward,  T.  D.  3195, 
C.  B.  4,  p.  153.) 

(a)4.  The  first  clause  of  the  first  sen- 
tence is  the  same  as  section  234(a)4  of  the 
1918  Act. 

Losses  are  deductible  only  in  the  year 
sustained  unless  in  order  to  clearly  reflect 
the  income  the  loss  should,  in  the  opinion 
of  the  Commissioner,  be  accounted  for  as 
of  a  different  period. 

Losses  on  so-called  "wash  sales"  of 
stock  or  securities  made  after  the  passage 
of  this  Act"are  not  deductible  except 
when  sustained  by  a  dealer  in  stock  or 
securities  in  a  transaction  made  in  the 
ordinary  course  of  its  business. 

In  case  of  losses  arising  from  destruc- 
tion of  or  damage  to  property  acquired 
before  March  1,  1913,  the  deduction  shall 


22 


1918. 


1921. 


{a)5. 

No  deduction  based  upon  additions  to 
a  reserve  for  fcad  debts  is  allowable. 


No  similar  provision. 


(a)6.  Dividends  from  a  corporation  tax- 
able under  this  title  upon  its  net  income, 
and  dividends  from  a  personal  service 
corporation  out  of  earnings  or  profits  upon 
which  income  tax  has  been  imposed  by 
Act  of  Congress  are  deductible. 


(a)7. 

No  similar  provision  but  procedure  is 
same.     (Art.  164,  Reg.  45.) 


(a)8. 


The  deduction  for  amortization  is  allow- 
able for  all  years  in  which  the  Act  is 
effective. 


Reexamination  of  the  return  shall  be 
made  within  three  years  after  the  termi- 
nation of  the  "present  war." 


(a)9. 

No  similar  provision. 


be  computed  upon  the  basis  of  its  value 
on  March  1,  1913. 

(a)o.  Same  as  section  234(a)5  of  1918 
Act  except  as  follows: 

(1)  The  Commissioner  may  in  his  dis- 
cretion allow  as  a  deduction  in  lieu  of 
debts  ascertained  to  be  worthless  and 
charged  off  within  the  year,  a  reasonable 
addition  to  a  reserve  for  bad  debts. 

(2)  When  satisfied  that  a  debt  is  re- 
coverable only  in  part,  the  Commissioner 
may  allow  such  debt  to  be  charged  oft  in 
part. 

(a)6.  Corporations  may  deduct  divi- 
dends received  from  a  domestic  corpo- 
ration other  than  a  corporation  entitled 
to  the  benefits  of  section  2(j2,  and  divi- 
dends "from  any  foreign  corporation 
when  it  is  shown  to  the  satisfaction  of  the 
Commissioner  that  more  than  50  per 
centum  of  the  gross  income  of  such  foreign 
corporation  for  the  three-year  period  end- 
ing with  the  close  of  its  taxable  year  pre- 
ceding the  declaration  of  such  dividends 
(or  for  such  part  of  such  period  as  the 
foreign  corporation  has  been  in  existence) 
was  derived  from  sources  within  the 
United  States  as  determined  under  sec- 
tion 217. 

(a)7.  Same  as  section  234(a)7  except  as 
follows: 

In  the  case  of  property  acquired  before 
March  1,  1913,  the  deduction  shall  be 
computed  upon  the  basis  of  its  fair  market 
price  or  value  on  March  1,  1913. 

(a)8.  Same  as  section  234(a)8  of  1918 
Act  except  as  follows: 

(1)  Instead  of  the  term  "present  war", 
the  words  "war  against  the  German  Gov- 
ernment" are  used. 

(2)  The  deduction  for  amortization  is 
allowable  only  for  the  taxable  years  end- 
ing before  March  3,  1924,  and  then  only 
if  claim  therefor  was  made  at  the  time  of 
filing  return  for  the  taxable  year  1918, 
1919,  1920,  or  1921. 

(3)  Reexamination  of  the  return  may 
or  shall  be  made  before  March  3,  1924. 
(Except  for  the  purpose  of  certain  Acts, 
resolutions,  and  proclamations,  this  date 
is  three  years  after  the  termination  of  the 
war  against  the  German  Government. 
See  Public  Resolution  No.  64,  66th  Con- 
gress, effective  March  3,  1921.) 

(a)9.  Same  as  section  234(a)9  of  1918 
Act  except  for  the  following  provision: 
J  '^And  provided  further,  That  such  deple- 
tion allowance  based  on  discovery  value 
shall  not  exceed  the  net  income,  com- 
puted ^vithout  allowance  for  depletion, 
from  the  property  upon  which  the  dis- 
covery is  made,  except  where  such  net 
income  so  computed  is  less  than  the  deple- 
tion allowance  based  on  cost  or  fair  market 
value  as  of  March  1,  1913. 'i 


23 


1918. 


1921. 


(a)10. 

This  subdivision  applies  to  all  insur- 
ance companies. 


(a)ll. 

No  similar  provision. 

No  similar  provision. 

(a)12. 

(a)13. 


(a)14.  Deduction  on  account  of  loss  in 
inventory  and  from  rebates. 

No  similar  provision.  See  articles  49 
and  50  of  Regulations  45. 


(b)  The  deductions  allowed  in  subdi- 
vision (a)  (except  those  allowed  in  para- 
graph (2)  and  in  clauses  (a),  (b),  and  (c) 
of  paragraph  3)  are  allowed  to  a  foreign 
corporation  to  the  extent  they  are  con- 
nected with  income  from  sources  within 
the  United  States. 

A  foreign  corporation  may  deduct  the 
amount  of  interest  paid  in  the  proportion 
that  its  gross  income  from  sources  within 
the  United  States  bears  to  its  total  grosa 
income  from  all  sources. 

Taxes  allowed  as  a  deduction  in  clauses 
(a),  (b),  and  (c)  of  paragraph  3  are  deduc- 
tible by  a  foreign  corporation  to  the  same 
extent  as  a  domestic  corporation.  See 
article  573  of  Regulations  45. 

Section  235. — Items  Not  Deductible. 


(a)  10.  Same  as  section  234(a)  10  of  1918 
Act  except  as  follows: 

(1)  This  subdivision  is  not  applicable 
to  life  insurance  companies. 

(2)  After  December  31,  1921,  this  sub- 
division shall  apply  only  to  mutual  insur- 
ance companies  other  than  life  insurance 
companies. 

(a)ll.  Same  as  section  234(a)ll  of  1918 
Act  except  as  follows: 

(1)  This  subdivision  does  not  apply  to 
corporations  taxed  under  section  213. 

(2)  This  subdivision  is  not  effective 
after  December  31,  1921. 

(a)12.  The  language  of  this  subdivision 
is  the  same  as  section  234(a)12  of  the  1918 
Act  except  for  the  reference  to  deductions 
allowed  under  paragraph  14. 

(a)  13.  The  language  of  this  subdivision 
is  the  same  as  section  234(a)  13  of  the  1918 
Act  except  for  the  reference  to  deductions 
allowed  under  paragraph  14  and  the  in- 
clusion of  "interinsurers  and  reciprocal 
underwriters"  in  the  list  of  corporations 
to  which  the  special  deductions  are 
allowed.  There  is  no  change  in  the  spe- 
cial deductions  allowed. 

No  similar  provision. 

(a)  14.  This  subdivision  provides  for 
cases  in  which  property  is  compulsorily 
or  involuntarily,  converted  into  cash  or 
its  equivalent  by  a  taxpayer  and  ia 
applicable  as  far  as  practicable  to  prior 
income  and  profits  tax  Acts  also. 

(b)The  deductions  allowed  in  subdivi- 
sion (a)  are  allowed  to  foreign  corpora- 
tions and  to  corporations  entitled  to  the 
benefits  of  section  262,  to  the  extent  that 
they  are  connected  with  income  from 
sources  within  the  United  States. 


Section  235. — Items  Not  Deductible 
BY  Corporations. 


Same  as  section  235  of  1918  Act. 
comparison  under  section  215. 


See 


24 


1918. 

Section  236. — Credits  Allowed. 

(a) 

(c)  A  specific  credit  of  $2,000  is  allowed 
to  a  domestic  corporation  against  net  in- 
come for  the  purpose  of  the  tax  imposed 
by  section  230. 

No  similar  provision. 


(b) 


(b)  In  the  case  of  a  return  for  a  fiscal 
year  ended  in  1918,  where  it  is  necessary 
to  compute  the  income  tax  under  section 
205(a),  the  total  profits  tax  for  the  entire 
fiscal  year  computed  under  the  respective 
Acts  is  credited  against  the  entire  net  in- 
come computed  under  such  Acts. 

Section  237. — Payment  of  Tax  at 
Source, 

The  rate  of  withholding  is  10  per  cent 
except  that  in  the  case  of  interest  upon 
obligations  of  a  corporation  containing  a 
tax-free  covenant,  the  rate  is  2  per  cent. 


Section  238. — Credit  for  Taxes. 


(a),  paragraph  1, 

Credit  is  allowed  for  income  and 
profits  taxes  paid  to  any  foreign  country 
upon  income  from  sources  tvithin  that 
country,  or  to  any  possession  of  the  United 
States. 

•  No  similar  provision.  When  a  credit 
for  taxes  is  allowable,  the  entire  amount 
of  the  tax  may  be  credited. 


1921. 

Section  236. — Credits  Allowed 
Corporations. 

(a)  Same  as  section  236(a)  of  1918  Act. 

(b)  A  specific  credit  of  .|2,000  is  allowed 
against  net  income  for  the  purpose  of  the 
tax  imposed  by  section  230  in  the  case  of  a 
domestic  corporation,  the  net  income  of 
which  is  $25,000  or  less. 

If  the  net  income  exceeds  $25,000,  the 
tax  imposed  by  section  230  shall  not  ex- 
ceed the  tax  which  would  be  payable  if 
the  $2,000  credit  were  allowed  plus  the 
amount  of  the  net  income  in  excess  of 
$25,000. 

(c)  The  amount  of  profits  tax  imposed 
for  the  same  taxable  year  is  allowed  as  a 
credit  against  net  income  in  the  same 
manner  as  in  section  236(b)  of  the  1918 
Act. 

(c)  This  subdivision  accomplishes  sub- 
stantially the  same  result  as  section  236(b) 
of  the  1918  Act. 


Section  237. — Payment  of  Corporation 
Income  Tax  at  Source. 

The  rate  of  withholding  is  10  per  cent 
for  1921  and  \2\  per  cent  for  succeeding 
years  except  that  in  the  case  of  interest 
upon  obligations  of  a  corporation  con- 
taining a  tax-free  covenant,  the  rate  is  2 
per  cent. 

Section  238. — Credit  for  Taxes  in 
Case  of  Corporations. 

(a)  Same  as  paragraph  1  of  section 
238(a)  of  1918  Act  except  as  follows: 

(1)  Credit  is  allowed  for  income  and 
profits  taxes  paid  to  any  foreign  country, 
or  to  any  possession  of  the  United  States. 


(2)  The  amount  of  the  credit  shall  not 
exceed  the  same  proportion  of  the  taxes, 
against  which  credit  is  taken,  which  the 
taxpayer's  net  income  (computed  with- 
out deduction  for  any  income  or  profits 
taxes  imposed  by  any  foreign  country  or 
possession  of  the  United  States)  from 
sources  without  the  United  States  bears 
to  its  entire  net  income  (computed 
without  such  deduction)  for  the  same 
taxable  year. 

(3)  "Net  income"  of  domestic  insur- 
ance companies  taxable  under  section  243 
or  246  means  net  income  as  defined  in 
sections  245  and  246. 


25 


1918. 

(a),  paragraph  2. 

(b)  The  credit  is  not  allowed  unless  a 
statement  is  furnished  showing  the 
amount  of  income  from  sources  within 
the  foreign  country  or  the  possession  of 
the  United  States  with  respect  to  which 
the  credit  is  claimed. 

(c) 


Section  240(c). 


The  credit  applies  to  "taxes  paid  (but 
not  including  taxes  accrued) "  by  the 
foreign  corporation. 

The  credit  applies  to  taxes  paid  by  the 
foreign  corporation  with  respect  to  in- 
come from  sources  mthout  the  United 
States. 

The  amormt  of  the  credit  is  the  same 
proportion  of  the  income  and  profits 
taxes  paid  (but  not  including  taxes 
accrued)  by  the  foreign  corporation  to  any 
foreign  country  or  possession  of  the  United 
States  upon  income  from  sources  without 
the  United  States,  wliich  the  amount  of 
any  dividends  (not  deductible  under  sec. 
234)  received  by  the  domestic  corporation 
from  such  foreign  corporation  during  the 
taxable  year  bears  to  the  total  taxable 
income  of  the  foreign  corporation  upon 
which  or  vnth  respect  to  which  the  taxes 
were  paid. 

The  credit  shall  in  no  case  exceed  the 
amount  of  such  dividends  (not  de- 
ductible under  sec.  234)  received  by  the 
domestic  corporation  during  the  taxable 
year. 


No  similar  provision. 
No  similar  provision. 

No  similar  provision. 

Section  239. — Corpohation  Returns. 
(a),  paragraph  1. 

(a),  paragraph  2. 


1921. 

(b)  Same  as  paragraph  2  of  section 
238(a)  of  1918  Act. 

(c)  Same  as  section  238(b)  of  1918  Act, 
except  that  the  benefit  of  the  credit  la 
not  allowed  unless  a  statement  is  fur- 
nished showing  the  amount  of  income 
from  sources  without  the  United  Stales. 

(d)  Similar  to  section  238(c)  of  1918 
Act  but  applicable  to  fiscal  years  ending 
in  1921. 

(e)  Similar  to  section  240(c)  of  1918 
Act.  Differences  are  in  the  following 
provisions: 

(1)  The  credit  applies  to  taxes  "paid", 
by  the  foreign  corporation. 

(2)  The  credit  applies  to  taxes  paid 
upon  or  with  respect  to  the  accumulated 
profits  of  the  foreign  corporation  from 
which  dividends  were  paid  to  the  do- 
mestic corporation. 

(3)  The  amount  of  the  credit  is  the 
same  proportion  of  the  income  and  profits 
taxes  paid  by  the  foreign  corporation  to 
any  foreign  country  or  possession  of  the 
United  States  as  the  amount  of  ^uch 
dividends  paid  be^rs  to  such  accuminated 
profits. 


(4)  The  credit  shall  in  no  case  exceed 
the  same  proportion  of  the  taxes  against 
which  it  is  credited  which  the  amount  of 
such  dividends  bears  to  the  amount  of 
the  entire  net  income  of  the  domestic 
corporation  in  which  such  dividends  are 
included. 

(5)  Definition  of  "accumulated  pro- 
fits." 

(6)  Definition  of  "year"  in  case  of  a 
foreign  corporation,  the  income  and 
profits  taxes  of  which  are  determined  on 
the  basis  of  an  accounting  period  of  less 
than  a  year. 

(f)  For  the  purposes  of  this  section,  a 
corporation  entitled  to  the  benefits  of 
section  262  is  treated  as  a  foreign  corpora- 
tion. 

Section  239. — Corporation  Returns. 

(a)  Same  as  paragraph  1  of  section 
239(a)  of  1918  Act. 

(b)  Same  provisions  as  paragraph  2  of 
section  239(a)  of  1918  Act. 


26 


1918. 


1921. 


No  similar  provision.  Under  section 
254,  the  Commissioner  is  authorized  to 
require  a  return  showing  amount  of  divi- 
dend paid,  name  and  address  of  stock- 
holder, number  of  shares  owned  and 
amount  of  dividend  received  by  each 
stockholder. 

Under  some  circumstances,  dates  and 
amounts  of  dividend  payments  are  shown 
in  connection  with  the  adjustment  of 
invested  capital. 

Section  240. — Consolidated  Returns.     Section  240. — Consolidated  Returns 

OF  Corporations. 


(c)  Statement  required  with  return 
showing  portion  of  earnings  or  profits  of 
the  corporation  (including  gains,  profits, 
and  income  not  taxed)  which  have  been 
distributed  or  ordered  to  be  distributed 
to  its  stockholders  or  members  during 
the  taxable  year. 


(a),  paragraph  1.  Affiliated  corporations 
shall  make  a  consolidated  return. 

Any  affiliated  corporation,  organized 
after  August  1,  1914,  and  not  successor  to 
a  then  existing  business,  50  per  cent  or 
more  of  the  gross  income  of  which  is  de- 
rived from  a  "Government  contract"  as 
defined  in  the  Act  shall  not  have  its  in- 
come included  in  a  consolidated  return. 

Affiliated  corporations  shall  make  a 
consolidated  return. 


(a),  paragraph  2. 


(b) 

(c)  Provision  for  credit  for  taxes  paid 
by  foreign  corporation  affiliated  with 
domestic  corporation.  See  comparison 
under  section  238. 

No  similar  provision. 


No  similar  provision. 


(a)  Affiliated  corporations  may  make  a 
consolidated  return  for  any  year  begin- 
ning on  or  after  January  1,  1922. 

No  similar  provision. 


Corporations  having  exercised  the  op- 
tion of  filing  either  separate  or  consoli- 
dated returns  are  required  to  adhere  to 
the  basis  selected  for  all  returns  unless 

Eermission  to  change  the  basis  is  gianted 
y  the  Commissioner. 

(b)  Same  as  paragraph  2  of  section 
240(a)  of  the  1918  Act  except  for  the 
omission  of  the  provisions  relating  to  the 
war  profits  credit  and  the  excess  profits 
credit  such  provisions  being  inapplicable. 
See  subdivision  (e)  for  such  credits  in 
returns  for  1921. 

(c)  Same  as  section  240(b)  of  1918  Act. 
See  comparison  under  section  238(e). 


(d)  For  the  purposes  of  this  section,  a 
corporation  entitled  to  the  benefits  ol 
section  262  is  treated  as  a  foreign  corpora- 
tion. 

The  Commissioner  may  for  the  purpose 
of  making  an  accurate  distribution  or 
apportionment  of  gains,  profits,  income, 
deductions,  or  capital,  consolidate  the 
accounts  of  related  trades  or  businesses, 
whether  unincorporated  or  incorporated, 
and  whether  organized  in  the  United 
States  or  not. 

(e)  Affiliated  corporations  shall  make 
consolidated  returns  for  any  taxable 
year  beginning  prior  to  January  1,  1922, 
in  the  same  manner  and  subject  to  the 
same  conditions  as  provided  by  the 
Revenue  Act  of  1918. 

(See  also  section  1331.) 


27 


1018. 

Section    241. — Time    and    Place    for 
Filing  Returns.    - 


(a) 


(b) 

Taxes  on  Insurance  Companies. 


See  sections  233(a)l  and  2,  and  234(a) 
10,  11,  12,  and  13  of  the  Act  and  articles 
548,  549;  568-572,  and  870  of  Regulations 
45. 


Part  IV. — Administrative  Provisions. 

Section  250. — Payment  of  Taxes. 

-  (a) 
(b),  paragraph  1. 

(b),  paragraph  2.  If  examination  of  a 
return  made  in  good  faith  shows  an  under- 
statement in  the  amount  of  the  tax,  not 
due  to  any  fault  of  the  taxpayer,  any  in- 
tallment  or  portion  of  installment  of  tax 
due  but  unpaid  shall  be  paid  upon  notice 
and  demand  from  the  collector  without 
penalty. 

If  the  understatement  is  due  to  negli- 
gence on  the  part  of  the  taxpayer  but 
without  intent  to  defraud,  there  shall  be 
added  as  part  of  the  tax  5  per  cent  of  the 
total  deficiency  plus  interest  at  the  rate 
of  1  per  cent  per  month  on  the  defi- 
ciency of  each  installment  from  the  time 
the  installment  was  due. 

(b),  paragraph  3. 


(c) 

(d)  Income  and  profits  taxes  due  under 
any  return  shall  be  determined  and 
assessed  within  five  years  after  the  return 
was  due  or  was  made. 


1921. 

Section    241. — Time    and    Place    for 
FiuNQ  Corporate  Returns. 

(a)  The  time  for  filing  corporate  re- 
turns is  the  same  as  under  the  1918  Act 
except  that  a  foreign  corporation  having 
no  office  or  place  of  business  in  the  United 
States  shall  file  its  return  at  the  same  tiine 
and  in  the  same  manner  as  provided  in 
section  227  in  the  case  of  a  nonresident 
aUen  individual. 

(b)  Same  as  section  241(b)  of  1918  Act. 

Sections  242-247. — Taxes  on  Insur- 
ance Companies. 

These  sections  provide  specifically  for 
taxation  of  insurance  companies,  and  the 
computation  of  gross  income,  deductions, 
and  net  income.  Special  terms  used  in 
connection  %vith  such  computations  are 
specifically  defined. 

Part  IV. — Administrative  Provisions. 

Section  250. — Payment  op  Taxes. 

(a)  Same  as  section  250(a)  of  1918  Act. 

(b),  paragraph  1.  Same  as  section  250(b) 
paragraph  1  of  1918  Act. 

(b),  paragraph  2.  Upon  examination  of 
a  return  and  recomputation  of  the  tax, 
any  installment  or  portion  of  installment 
of  tax  due  but  unpaid,  together  with 
interest  at  one-half  of  1  per  cent  per  month, 
shall  be  paid  ujjon  notice  and  demand 
from  the  collector. 

■  If  any  part  of  the  deficiency  is  due 
to  negligence  or  intentional  disregard  of 
authorized  rules  and  regulations  with 
knowledge  thereof,  but  without  intent  to 
defi-aud,  there  shall  be  added  as  part  of 
the  tax  5  per  cent  of  the  total  deficiency 
in  the  tax  and  interest  shall  be  collected 
at  1  per  cent  per  month  on  the  deficiency 
in  each  installment  from  the  time  the 
installment  was  due. 

The  penalty  in  case  the  deficiency  is 
due  to  fraud  with  intent  to  evade  the  tax 
is  the  same  as  provided  in  paragraph  3  of 
section  250(b)  of  the  1918  Act  with  the 
added  provision  that  in  such  cases  the 
whole  amount  of  the  tax  unpaid,  includ- 
ing the  penalty,  becomes  due  and  payable 
upon  notice  and  deraand  from  the  col- 
lector. 

(c)  Same  as  section  250(c)  of  1918  Act. 

(d)  Income  and  profits  taxes  due  under 
any  return  for  1921  or  succeeding  years 
shall  be  determined  and  assessed  within 
four  years  after  the  return  was  filed. 


28 


1918. 

See  preceding  paragraph.  No  pro- 
vision with  respect  to  waiving  rights 
under  the  five-year  limitation  upon 
assessment. 


No  suit  or  proceeding  for  the  collection 
of  any  tax  due  under  the  Revenue  Act  of 
1918  shall  be  begun  after  the  expiration 
of  five  years  after  the  date  ivhen  the  return 
lias  due  or  was  made. 


No  similar  provision. 


Tax  due  in  case  of  a  false  or  fraudulent 
return  with  intent  to  evade  the  tax,  may 
be  determined  at  any  time  after  the  return 
is  filed  and  the  tax  may  be  collected  at 
any  time  after  it  becomes  due. 


No  similar  proviBion. 


No  similar  provision. 


(e),  paragraph  1.  The  exemption  from 
5  per  cent  penalty  and  liability  for  inter- 
est at  the  lower  rate  (one-half  of  1  per 
cent)  apply  to  any  tax  which  is  the  sub- 
ject of  a  bona  fide  claim  for  abatement. 


(e),  paragraph  2.  No  similar  provision 
with  respect  to  notice  and  demand  in 
case  of  installments  other  than  the  first. 
See,  however,  T.  D's.  2840  and  3136, 
which  prescribe  a  procedure  which  is 
similar  except  for  the  thirty-day  limit. 


1921. 

Taxes  due  under  any  return  made 
under  this  Act  for  prior  taxable  years,  or 
under  prior  income  or  profits  tax  acts, 
or  section  38  of  the  Act  of  August  5,  1909, 
shall  be  determined  within  five  years 
after  the  return  was  filed,  unless  both  the 
Coromissioner  and  the  taxpayer  consent 
to  a  later  determination,  assessment,  and 
collection  of  the  tax. 

No  suit  or  proceeding  for  the  collec- 
tion of  such  taxes  due  under  this  Act, 
prior  income  or  profits  tax  Acts,  or  sec- 
tion 38  of  the  Act  of  August  5,  1909,  shall 
be  begun  after  the  expiration  of  five  years 
after  the  date  when  such  return  was  filed. 
This  provision  does  not  affect  suits  begun 
at  the  time  this  Act  was  passed . 

Taxes  due  upon  income  received  dur- 
ing the  life  time  of  a  decedent  shall  be 
determined  and  assessed  within  one  year 
after  written  request  therefor  by  the 
proper  representative  of  the  decedent's 
estate. 

Tax  due  in  case  of  a  false  or  fraudulent 
return  with  intent  to  evade  the  tax,  or  in 
case  of  failure  to  file  a  required  return 
may  be  de'termined,  assessed,  and  col- 
lected, or  suit  or  proceeding  for  its  collec- 
tion may  be  begun  at  any  time  after  the 
tax  becomes  due. 

In  cases  involving  amortization,  and 
in  cases  of  final  settlement  of  losses  and 
other  deductions  tentatively  allowed 
pending  exact  determination,  the  tax  or 
any  deficiency  therein  may  be  deter- 
mined, assessed,  and  collected  at  any 
time,  but  prior  to  assessment  the  taxpayer 
shall  be  notified  and  given  a  period  of  not 
less  than  thirty  days  in  which  to  file  an 
appeal  and  be  heard  with  respect  to  such 
tax. 

Provision  for  notice  to  taxpayer  and 
thirty-day  period  for  appeal  in  case  of 
additional  tax  shown  to  be  due  upon 
examination  of  returns  under  the  Rev- 
enue Acts  of  1916,  1917,  1918,  and  1921. 

(e),  paragraph  1.  Same  as  paragraph  1 
of  section  250(e)  of  1918  Act  except  for 
exemption  from  5  per  cent  penalty  and 
liability  for  interest  at  the  lower  rate 
(one-half  of  1  per  cent)  which  apply  only 
in  case  of  tax  which  is  the  subject  of  a 
bona  fide  claim  for  abatement  filed  with- 
in ten  days  after  notice  and  demand  by 
the  collector  where  the  taxpayer  has  not 
had  the  benefit  of  subdivision  (d). 

(e\  paragraph  2.  Same  as  paragraph  2 
of  section  250(e)  of  1918  Act  except  that 
in  the  case  of  installnjents  of  tax  other 
than  the  first,  the  collector  may  mail 
notice  of  the  amount  and  due  date  of  the 
installment  to  the  taxpayer  ^^'ithin  thirty 
days  and  not  later  than  ten  days  before 


29 


1918. 


1931. 


No  similar  provision. 


(g)  Tenni nation  of  taxable  period  by 
Commissioner  to  bo  made  as  at  the  end 
of  the  calendar  month  then  last  past. 

No  similar  provision. 


No  similar  provision. 


No  similar  provision. 


No  similar  provision. 


Section  251. — Receipts  for  Taxes. 


Section  252.— Refunds. 


No  similar  provision. 


No  similar  provision. 


No  similar  provision. 


the  installment  becomes  due.  Such 
notice  shall  be  sufficient  noticQ  and  de- 
mand under  this  section. 

(f)  Postponement  of  payment  of  de- 
ficiency in  tax  (except  in  cases  of  negli- 
gence or  fraud  with  intent  to  evado  the 
tax)  where  undue  hardship  results  to 
taxpayer. 

(g)  Termination  of  taxable  period  by 
Commissioner  to  be  made  immediately. 

The  Commissioner  may  in  his  discre- 
tion waive  the  requirementa  of  this  sub- 
division in  the  case  of  a  citizen  of  the 
United  States  about  to  depart  from  tixe 
United  States. 

Aliens  before  leaving  the  United  States 
shall  secure  a  certificate  showing  compli- 
ance with  all  income  and  profits  tax  ob- 
ligations. 

Penalty  for  violation  of  or  attempt  to 
violate  this  subdivision  is  25  per  cent  of 
the  total  tax  or  deficiency  in  tax,  together 
with  interest  at  1  per  cent  per  month 
from  the  time  the  tax  became  due.  This 
penalty  is  in  addition  to  all  other 
penalties. 

AH  other  provisions  of  this  subdivision 
are  same  as  section  250(g)  of  1918  Act. 

(h)  Subdivisions  (e),  (f),  and  (g)  shall 
apply  to  assessment  and  collection  of 
taxes  accrued  or  which  may  accrue 
under  the  Revenue  Acts  of  1917,  1918, 
and  1921. 

Section  251. — Receipts  for  Taxes. 

Same  as  section  251  of  1918  Act. 

Section  252. — Refunds. 

Same  as  section  252  of  1918  Act  except 
as  follows: 

(1)  Provision  is  made  for  credit  or  re- 
fund of  overpayments  of  tax  under  1921 
Act. 

(2)  Pro\'ision  made  for  credit  or  refund 
in  cases  where  invested  capital  is  de- 
creased and  the  decrease  is  due  to  failure 
on  the  part  of  the  taxpayer  to  take 
adequate  deductions  in  prior  years.  In 
such  cases  the  five-year  limitation  does 
not  apply. 

(3)  Claims  filed  prior  to  the  passage  of 
the  1918  Act  under  section  14(a)  of  the 
1916  Act,  or  prior  to  the  passage  of  the 
1921  Act  under  section  252  of  the  1918 
Act  are  not  barred. 

See  section  1324  for  new  provision 
allowing  interest  on  refunds  or  credits. 


30 


1918. 


1931. 


Section  253. — Penalties. 


Section   254. — Returns   of  Payments 
OF  Dividends. 


Section  253. — Penalties. 

Same  as  section  253  of  1918  Act. 

Section   254. — Returns   of  Payments 
OP  Dividends. 

Same  as  section  254  of  1918  Act. 


Section  255. — Returns  of  Brokers.       Section   255. — Returns    of   Brokers. 

Same  as  section  255  of  1918  Act. 

Section  256. — Information  at  Source.     Section  256. — Information  at  Source. 

Same  as  section  256  of  1918  Act  except 
for  changes  necessary  to  make  the  section 
applicable  to  1921  and  subsequent  years. 


Section  257. — Returns  to  be  Public 
Records. 


Section  258. — Publication  op 
Statistics. 


Section  259. — Collection  op  Foreign 
Items. 


Section  260. — Citizens  op  United 
States  Possessions. 


Section  261. — Porto  Rico  and 
Philippine  Islands. 


Section  257.- 


No  similar  provision.  Under  the  1918 
Act  citizens  of  the  United  States  or 
domestic  corporations  are  required  to 
include  in  gi-oss  income,  all  income  from 
sources  within  possessions  of  the  United 
States  but  are  allowed  to  credit  the 
amount  of  the  income  and  profits  taxes 
due  to  the  United  States  with  the  amount 
of  income  and  profits  taxes  paid  to  pos- 
sessions of  the  United  States.  See  sec- 
tions 222  and  238. 


-Returns  to  be  Public 
Records. 


Same  as  section  257  of  1918  Act. 

Section  258. — Publication  op 
Statistics. 

Same  as  section  258  of  1918  Act. 

Section  259. — Collection  of  Foreign 
Items. 

Same  as  section  259  of  1918  Act, 

Section  260. — Citizens  op  Possessions 
of  the  United  States. 

Same  as  section  260  of  1918  Act  except 
for  the  provision  relating  to  imposition  of 
income  taxes  in  the  Virgin  Islands  of  the 
United  States. 

Section  261. — Porto  Rico  and 
Philippine  Islands. 

This  section  in  effect  continues  income 
taxation  in  Porto  Rico  and  the  Philip- 
pines as  described  in  section  261  of  the 
1918  Act. 

Section  262. — Income  from  Sources 
Within  the  Possessions  of  the 
United  States. 

The  provisions  of  this  section  are  new. 


31 


1918. 


No  similar  provieion.     See  section  200 
of  this  Act. 

TITLE    III.— WAR    PROFITS    AND 
EXCESS  PROFITS  TAX. 

Part  I. — General  Definitions. 

Section  300. 

First  taxable  year  same  as  first  taxable 
year  under  Title  II. 

Part  n. — Imposition  of  Tax. 

Section  301. 

(a)  Rates  for  taxable  year  1918. 

(b)  Rates  for  taxable  years  1919  and 
1920. 


(c) 


(d) 


(e)  Allocation  of  tax  in  case  of  trans- 
portation companies,  for  purposes  of  the 
Act  of  March  21,  1918,  relating  to  trans- 
portation systems  while  under  Federal 
control . 

Section  302. 


Limitation  of  profits  tax. 


Section  303. 

Tax    when    partly    personal    service 
business. 


1921. 

Section  263. — EPFEcriva  Date  op  TrrLB. 

Title  II  is  effective  as  of  January  li 
1921. 

TITLE    III.— WAR    PROFITS     AND 
EXCESS  PROFITS  TAX. 

Part  I.— General  Definitions. 

Section  300. 

Similar  to  section  300  of  1918  Act. 
Definition  of  first  taxable  year  omitted. 
Title  III  applifable  for  1921  only. 

Part  n. — Imposition  of  Tax. 

Section  301. 


(a)  The  rates  of  tax  are  the  same  as 
provided  in  section  301(b)  of  the  1918 
Act. 

(b)  This  subdivision  provides  for  im- 
position of  profits  tax  upon  income  from 
Government  contracts  as  defined  in  sec- 
tion 2(11)  in  practically  the  same  manner 
and  at  the  same  rates  as  provided  in 
section  301(c)  of  the  1918  Act  in  case  of 
income  from  such  contracts  during  1919 
and  1920.  The  effect  is  to  tax  such  in- 
come at  the  rates  in  effect  under  the  1918 
Act  for  1918.  The  war  profits  credit  and 
the  excess  profits  credit  are  the  same  as 
under  the  1918  Act. 

(c)  Same  provision  as  in  section  301(d) 
of  1918  Act. 

No  similar  provision. 


Section  302. 

The  limitation  upon  the  amount  of  the 
tax  is  the  same  as  provided  in  section  302 
of  the  1918  Act  for  taxes  imposed  by 
section  301(b)  of  that  Act.  In  other 
words  the  limitation  of  the  tax  for  1921 
is  the  same  as  provided  in  the  1918  Act 
for  1919  and  1920.  The  limitation  of  tax 
upon  the  income  from  Government  con- 
tracts is  the  same  as  prescribed  in  section 
302  of  the  1918  Act  in  the  case  of  such 
income  during  1919  and  1920. 

Section  303. 

Same  as  section  303  of  1918  Act  except 
that  reference  to  the  war  profits  credit 
under  section  311  is  omitted. 


32. 


1918. 

Section  304. 
Exemptions  from  profits  tax. 


Section  305. 
Apportionment  of  specific  exemption. 
Part  m.— Credits. 

Section  31Q, 
Definition  of  "prewar  period.'' 

Section  311. 
War  profits  credit  defined. 

Section  312, 
Excess  profits  credit. 

Part  IV. — Net  Income. 

Section  320. 

This  section  provides  for  the  computa- 
tion of  the  net  income  for  the  prewar 
period  and  for  the  taxable  year. 


Part  V. — Invested  Capital. 

Section  325. 

Definitions  of  terms  relating  to  invested 
capital. 

Section  326. 
Invested  capital. 

Section  327. 
Special  cases. 


1921. 

Section  304. 

Same  as  section  304  of  1918  Act  except 
that  subdivision  (d)  exempts  the  net  in- 
come derived  by  a  corporation  from  min- 
ing gold  from  the  war  excess  profits  tax 
imposed  by  Title  II  of  the  1917  Act. 

Section  305. 

Same  as  section  305  of  1918  Act. 

Part  III.— Excess  Profits  Credit. 


No  similar  provision. 

No  similar  provision. 

Section  312. 

Same  as  section  312  of  1918  Act  and,  in 
addition  thereto,  a  corporation  entitled 
to  the  benefits  of  section  262  is  not  en- 
titled to  the  specific  exemption  of  $3,000. 

Part  IV. — Net  Income. 

Section  320. 

This  section  provides  that  the  net  in- 
come for  the  taxable  year  shall  be  com- 
puted upon  the  same  basis  and  in  the 
same  manner  as  provided  for  income  tax 
purposes  in  Title  II  of  this  Act.  No 
provision  for  computation  of  prewar  oet 
income. 

Part  V. — Invested  Capital. 

Section  325. 

Same  as  section  325  of  1918  Act  except 
that  in  the  definition  of  "admissible 
assets  "  no  reference  is  made  to  section  330. 

Section  326. 

Same  as  section  326  of  1918  Act  except 
that  in  defining  "average  invested 
capital"  no  reference  is  made  to  section 
311. 

Section  327. 

Same  as  section  327  of  1918  Act  except 
that  corporations  entitled  to  the  benefits 
of  section  262  are  added  to  the  cases  in 
which  the  tax  is  to  be  determined  under 
section  328. 


33 


1918. 

SBCnoN  328. 

(a)  Computation    of    tax    in    special 
cases. 


(b),  paragraph  1. 

(b),  paragraph  2.  Tax  to  be  50  per  cent 
of  net  income,  pending  determination  of 
taxable  status. 

(c) 

Part  VI.— Reorganizations. 

Section  330. 

Provision  for  prewar  data  in  the  case  of 
reorganization,  consolidation,  or  change 
of  ownership  after  January  1,  1911,  of  a 
trade  or  business  now  carried  on  by  a 
corporation. 

Option  to  trade  or  business  organized 
as  a  corporation  before  July  1,  1919,  to 
be  taxed  as  a  corporation  from  January  1, 
1918. 


Section  331. 

Part  VII. — Miscelianeous. 

Section  335. 

(a)  and   (b).  Computation  of  tax   for 
fiscal  years  ending  in  1918  or  1919. 

No  similar  provision. 


(c)  Provision  for  computation  of  profits 
tax  for  1917,  of  partnership  or  personal 
service  corporation  with  fiscal  year  ended 
in  1918,  and  for  refunding  of  any  tax 
paid  for  any  period  after  December  31, 
1917. 

Section  336. 

Any  corporation  not  exempt  under 
section  304  of  this  Act  shall  make  a 
return  under  this  title.  Returns  are  to  be 
made  under  and  subject  to  the  same  con- 
ditions as  prescribed  for  income  tax 
purposes  in  Title  II. 


1931. 

Section  328. 

(a)  Same  as  section  328(a)  of  1918  Act 
except  for  the  additional  provision  that 
in  the  case  of  a  corporation  entitled  to 
the  benefits  of  section  262,  the  specific 
exemption  of  $3,000  is  to  be  disregarded 
in  computing  the  tax. 

(b),  paragraph  1.  Same  as  paragraph  1 
of  section  328(b)  of  1918  Act. 
No  similar  provision. 


(c)  Same  as  section  328(c)  of  1918  Act. 
Part  VI. — Reorganizations. 

No  similar  provision. 


A  similar  option  is  granted  by  section 
229  in  the  case  of  a  trade  or  business 
organized  as  a  corporation  within  four 
months  after  the  passage  of  this  Act,  to 
be  taxed  as  a  corporation  from  January  1, 
1921. 

Section  331. 
Same  as  section  331  of  1918  Act. 
Part  VII. — Miscellaneous. 
Section  335. 

(a)  Same  as  section  335(a)  and  (b)  of 
1918  Act  except  for  changes  necessary 
to  make  applicable  to  fiscal  years  ended 
in  1921. 

(b)  Provision  is  made  in  this  subdivi- 
sion for  computation  of  profits  tax  for  that 
portion  of  a  fiscal  year  falling  within  1921. 
The  profits  tax  provisions  of  the  Act  are 
not  applicable  to  1922  and  succeeding 
years. 

No  similar  provision. 


Section  336. 

Any  corporation  not  exempt  under 
section  304  of  this  Act  shall  make  a  return 
under  this  title.  Returns  are  to  be  made 
under  and  subject  to  the  same  conditions 
as  prescribed  for  income  tax  purposes  in 
Title  II. 


34 


1918. 

Section  337. 

Limitation  of  war  profits  and  excess 
profits  tax  upon  gain  from  sale  of  mines, 
oil  or  gas  wells,  or  any  interest  therein, 
where  the  principal  value  of  the  property 
has  been  demonstrated  by  prospecting  or 
exploration  and  discovery  work  done  by 
the  taxpayer. 


No  similar  provision.     See  sections  200 
and  300  of  this  Act. 

TITLE  XIII.— GENERAL  ADMINIS- 
TRATIVE PROVISIONS. 


Section  1305,  paragraph  1. 


Section  1301(d). — ^Advisory  Tax 
Board. 

Provision  for  creation  of  the  "Advisory 
Tax  Board  "  and  the  submission  of  ques- 
tions thereto. 

Section  1309. 


Paragraph  1.  Authority  for  riiles  and 
regulations  for  the  enforcement  of  the 
provisions  of  this  Act. 

Section  1305. — Extension  of  Existing 
Statutes. 

Application  of  laws,  authority  of  Com- 
missioner to  require  returns  and  examine 
books  and  witnesses. 

Section  1313. 


Treatment  of  fractional  part  of  cent  in 
payment  of  tax. 


Section  1305,  paragraph  2. 


Section  1305,  paragraph  3. 


Ko  similar  provision. 


1921. 

Section  337. 
Same  as  section  337  of  1918  Act. 


Section  338. — Effective   Date  of 
Title. 

This  title  shall  take  effect  as  of  January 
1,  1921. 

TITLE  XIII.— GENERAL  ADMINIS- 
TRATIVE PROVISIONS. 

Section  1300. — Laws  Made  Applicable. 

Same  as  paragraph  1  of  section  1305  of 
1918  Act. 


No  similar  provision.    See  section  1327. 


Section    1303. — Rules    and    Regula- 
tions. 

Paragraph  1.  Same  as  paragraph  1  of 
section  1309  of  1918  Act. 


See   comparison   under  sections   1300, 
1307,  and  1308. 


Section  1306. — Fractional  Parts  of  a 
Cent. 

Same  as  section  1313  of  1918  Act. 

Section  1307. — Returns. 

Same  as  paragraph  2  of  section  1305  of 
1918  Act. 

Section  1308.— Examination  of  Books 
and  Witnesses. 

Same  as  paragraph  3  of  section  1305  of 
1918  Act. 

Section    1309. — Unnecessary  Exami- 
nations. 

Taxpayers  shall  not  be  subjected  to  un- 
necessary examinations  or  investigations. 


35 


1918. 


1921. 


Section  1310. 


Section  1318. 

No  similar  provision. 


Section  1317. 


Amendment  of  eections  31G4,  3165, 
3167,  3172,  3173,  and  3176,  Revised 
Statutes. 


No  similar  provision. 


No  similar  provision. 


No  similar  provision. 


Section  1316. 


Paragraph  (a).    Amendment  of  section 
3220,  Revised  Statutes. 


Section  3228  of  the  Revised  Statutes 
provides  that  claims  for  refund  of  taxes 
or  penalties  must  be  presented  to  the 
Commissioner  within  two  years  next  after 
the  cause  of  action  accrued. 


Jurisdiction  op  Courts. 
Same  as  section  1318  of 


(a)  and  (b). 
1918  Act. 

(c)  Amendment    of   paragraph    20    of 
section  24  of  Judicial  Code. 


Section 


1311. — Amendments 
VISED  Statutes. 


TO    Re- 


Sections  3164,  3165,  3167,  3172,  3173. 
and  3176  of  Revised  Statutes  as  amended 
by  section  1317  of  the  1918  Act  are  re- 
enacted  without  change. 

Section  1312. — Final  Determinations 
AND  Assessments. 

Provision  for  final  determination  and 
assessment  upon  agreement  by  the  tax- 
payer and  the  Commissioner  with  the 
approval  of  the  Secretary. 

Section  1313. — Administrative 
Review. 

"That  in  the  absence  of  fraud  or  mis- 
take in  mathematical  calculation,  the 
findings  of  facts  in  and  the  decision  of  the 
Commissioner  upon  (or  in  case  the 
Secretary  is  authorizea  to  approve  the 
same,  then  after  such  approval)  the  merits 
of  any  claim  presented  under  or  author- 
ized by  the  internal-revenue  laws  shall 
not  be  subject  to  review  by  any  other 
administrative  officer,  employee,  or  agent 
of  the  United  States." 


Section    1314. 


-Retroactive   Regula- 
tions. 


Provision  for  application  of  regulations 
or  Treasury-  decisions  \vithout  retroactive 
effect. 

Section  1315. — Refunds. 

Section  3220  of  the  Revised  Statutes  as 
amended  by  section  1316(a)  of  the  1918 
Act  is  reenacted  without  cnange. 

Section  1316. 

Section  3228  of  the  Revised  Statutes 
is  amended  so  as  to  require  all  claims  for 
refund  or  credit  of  internal  revenue 
taxes  or  penalties,  to  be  presented  to  the 
Commissioner  within/our  years  next  after 
payment  of  such  taxes  or  penalties. 

This  section  (1316)  except  as  modified 
by  section  252  shall  apply  retroactively 
to  claims  for  refund  under  the  Revenue 
Acta  of  1916,  1917,  and  1918. 


36 


1018. 


1921. 


The  subject  matter  covered  by  section 
3226,  Revised  Statutes,  as  amended  by- 
section  1318  of  the  1921  Act  was  included 
in  sections  3226  and  3227,  Revised 
Statutes.  The  limitation  of  time  within 
which  suit  could  be  brought  was  two 
years  after  the  cause  of  action  accrued. 


Section  1316. 

Paragraph  (b).  Amendment  of  section 
3225,  Revised  Statutes. 


No  similar  provision. 


No  similar  provision. 


/^ 


Section  1314. 


Provision  for  acceptance  of  Treasury 
certificates  of  indebtedness  and  uncerti- 
fied checks  in  payment  of  taxes. 


Section  1319. 

Penalty  prescribed  for  falsely  ascrib- 
ing a  portion  of  the  sale  or  lease  price 
of  any  article  to  a  tax  imposed  by  the 
United  States. 


Section  1318. — Limitation  Upon  Suits 
AND  Prosecutions. 

Section  3226  of  the  Re\'ised  Statutes  as 
amended  by  this  section  includes  the  re- 
striction upon  bringing  suit  for  recovery 
of  taxes  and  penalties  and  the  limitation 
of  time  within  which  such  suit  may  be 
brought,  viz.,  five  years  after  the  date  the 
tax  or  penalty  was  paid. 

Section  1319. 

This  section  repeals  section  3227  of  the 
Revised  Statutes  which  contained  the 
two-year  limitation  upon  suits  for  re- 
covery of  taxes  or  penalties.  The  limita- 
tion of  time,  changed  to  five  years,  is 
included  in  section  3226  of  the  Revised 
Statutes  as  amended  by  section  1318  of 
this  Act.  Suits  or  proceedings  instituted 
prior  to  the  passage  of  this  Act  are  not 
affected  by  the  repeal. 

Section  1323. — Fraudulent  Returns. 

Section  3225  of  the  Revised  Statutes  as 
amended  is  reenacted  without  change. 

Section  1324. — Interest  on  Refunds 
and  Judgments. 

(a)  Provision  for  allowance  and  pay- 
ment of  interest  in  case  of  allowance  of  a 
claim  for  refund  of  or  credit  for  taxes  paid. 

(b)  Section  177  of  the  Judicial  Code 
amended  so  that  interest  may  be  allowed 
in  the  case  of  judgment  rendered  by  any 
court  after  the  passage  of  the  Revenue 
Act  of  1921  against  the  United  States  for 
taxes  or  penalties  erroneously  or  illegally 
assessed  or  collected. 

Section  1325. — Payment  of  Taxes  by 
Check  or  United  States  Securities. 

Same  as  section  1314  of  the  1918  Act 
except  that  notes  issued  by  the  United 
Stated  may  also  be  received  in  payment 
of  income  and  profits  taxes. 

Section  1326. — Frauds  on  Purchasers. 

Same  as  section  1319  of  1918  Act. 


Section  1327. — Tax  Simplification 
Board. 


No    similar    provision. 
1301(d).) 


(See    section         Tax  Simplification  Board  established. 


37 


1918. 


See  section  213(b)4  of  the  1918  Act,  the 
several  Liberty  Loan  Acts  as  amended 
and  supplemented,  and  Regulations  45, 
articles  77-82  for  Liberty  bond  and  Vic- 
tory note  exemptions  under  the  J918  Act. 


Section  1320. 


United  States  bonds  may  be  deposited 
in  lieu  of  surety  with  the  Treasurer  or  an 
Assistant  Treasurer  of  the  United  States, 
a  Government  depositary,  a  Federal  re- 
serve bank,  or  a  member  bank. 


No  similar  provision  in  either  the  1917 
or  the  1918  Act.  Consolidated  returns 
for  1917  by  affiliated  corporations  were 
permitted  or  required  in  accordance  with 
articles  77  and  78  of  Regulations  41  and 
Treasury  Decisions  2662  and  2901.  Under 
the  1918  Act  consolidated  returns  were 
required  by  section  240. 


1921. 

Section  1328. — Conqoudation  of  Lib- 
erty Bond  Tax  Exeitptions. 

The  Liberty  bond  tax  exemption  ia 
consolidated  by  this  section  so  that  from 
January  1,  1921,  to  and  including  July 
2,  1923,  the  total  possible  principal 
amount  of  bonds,  the  interest  upon 
which  is  entirely  exempt  from  surtax  and 
war  profits  and  excess  profits  taxes,  ia 
$160,000,  and  from  July  3,  1923,  to  July 
2,  1926,  $55,000.  These  exemptions  are 
unconditional.  The  tax  exempt  features 
of  Victory  notes  remain  unchanged. 
See  Regulations  62,  articles  77-85  for 
further  explanations. 

Section  1329. — Deposit  of  United 
States  Bonds  or  Notes  in  Lieu  of 
Surety. 

Same  as  section  1320  of  1918  Act  except 
that  United  States  note^  may  also  be 
deposited  in  lieu  of  surety,  and  that  bonds 
or  notes  may  be  deposited  with  the 
Treasurer  of  the  United  States,  a  Federal 
reserve  bank,  or  other  depositary  desig- 
nated for  that  purpose  by  the  Secretary. 

Section  1331. — Consolidated  Retutins 
for   Year   1917. 

This  section  is  declaratory  of  the  pro- 
visions of  Title  II  of  the  Revenue  Act  of 
1917  and  construes  that  title  as  imposing 
the  tax  therein  mentioned  upon  the 
basis  of  consolidated  returns  of  net  in- 
come and  invested  capital  in  the  case  of 
domestic  corporations  and  domestic  part- 
nerships which  were  affiliated  during 
1917.  Conditions  are  stated  under  which 
corporations  and  partnerships  are  deemed 
to  be  affiliated  for  the  purpose  of  this 
section. 

Section  1332. — Alternative  Tax  on 
Personal  Service  Corporations. 


No  similar  provision. 


This  section  provides  for  an  alternative 
tax  on  corporations  classed  as  personal 
service  corporations  under  section  218(e) 
of  the  1918  Act  and  section  218(d)  of  the 
1921  Act  in  case  either  of  those  sub- 
divisions are,  by  final  adjudication,  de- 
clared invalid.  Provision  is  made  also 
for  refund  or  credit  of  taxes  paid  under 
those  subdivisions. 


38 


1918. 


1921. 


TITLE  XIV.— GENERAL 
PROVISIONS. 

Section  1400. 

This   section    contains   provisions   re- 
pealing certain  parts  of  prior  Acts. 

Section  1402. 


Saving  clause  in  event  of  unconstitu- 
tionality. 

Sections  1403  and  1404. 


TITLE  XIV.— GENERAL 
PROVISIONS. 

Section  1400. — Repeals. 

This    section    contains    provisions    re- 
pealing certain  parts  of  prior  Acts. 

Section  1403. — Saving  Clause  in 
Event  op  Unconstitutionality. 

Similar  to  section  1402  of  1918  Act. 


Citation  of  Revenue  Acts  of  1916  and 
1917. 

Section  1405. 

Citation  of  Revenue  Act  of  1918. 

Section  1408. 

Provision  for  inspection  of  Government 
contracts. 

Section  1409. 

The  Act  is  effective,  unless  otherwise 
specially  provided,  on  the  day  following 
its  passage. 


No  similar  provisions. 


See  section  1. 


No   similar   provisions.     Section    1408 
of  the  1918  Act  continues  in  effect. 

Section  1404. — Effective  Date  op  Act. 

The  Act  is  effective  except  as  other- 
wise provided,  upon  its  passage. 


INDEX. 


Italic   figures   in   parentheses   are   section    numbers   of   the   1918    Act;    the   roman   flgrares    are 
section  numbers  of  the  1921  Act. 

Page. 

Abatement,  interest  and  penalty  when  claim  rejected  (250) 27 

Acts,  citation  of  (/^5,  1404,  1405,  1) 38,1 

Administrative  review  (1313) 35 

Advisory  Tax  Board  {ISOl) 34 

Aliens — 

Nonresident — 

Apportionment  of  income  and  deductions  (217) 13 

Deductions  allowed  [214(b)] 11 

Gross  income  defined  (213) 7 

Income  from  ships  documented  under  laws  of  foreign  country  (213) . .  7 

Net  income,  computation  (217) 13 

Alternative  tax  on  personal  service  corporations  (1332) 37 

American  Legion,  contributions  to  [214(a)ll] 11 

Amortization — 

Deduction  by  corporations  [234(a)8] 22 

Deduction  by  individuals  [214(a)9] 10 

Deficiency  in  tax,  limitation  of  assessment  (250) 27 

Appeal,  additional  assessments  (250) 27 

Bad  debts,  deduction  by  corporations  [234(a)5] 22 

Bad  debts,  deduction  by  individuals  [214(a)7] 10 

Bank  deposits,  interest  received  by  nonresident  aliens  (217) *. 13 

Bequest,  devise  or  inheritance,  sale  of  property  received  by,  gain  or  loss  (202) . .  2 

Books  and  witnesses,  examination  of  {1305,  1308) 34 

Brokers,  returns  of  information  (255) 30 

Building  and  loan  association,  dividends  and  interest  from  (213) 7 

Building  and  loan  association,  exemption  of  (231) 19 

Capital  gain,  definition  and  computation  (206) 6 

Cemetery  company,  exemption  of  (231) 19 

Charitable  contributions,  deduction  by  estates  and  trusts  (219) 16 

Charitable  contributions,  deduction  by  individuals  [214(a)ll] 11 

Citizen  entitled  to  benefits  of  section  262 — 

Credit  for  taxes  (222) 17 

Deductions  and  credits  [214(b),  217] 11, 13 

Community  chest,  fund  or  foundation — 

Contributions  to  [214(a)ll] 11 

Exemption  of  (231) 19 

Compensation,  income  of  nonresident  aliens  (217) 13 

Compensation,  military  or  naval  service  [213{h)8'\ ^ 8 

Consolidation,  gain  or  loss  from  (202) 2 

Control  of  corporation,  definition  (202) 2 

Corporations — 

Accumulation  of  profits  (220) 16 

Credits  allowed  (236) 24 

Credit  for  taxes — 

Domestic  corporation  affiliated  with  foreign  corporation  {240,  238) 26,  24 

Foreign  (238) 24 

Deductions  allowed  (234) 21 

Exemption  of  (231) 19 

Foreign — 

Deductions  [234(b)]- 23 

Gross  income  (233) 20 

Income  from  ships  documented  under  laws  of  foreign  country  (213) 7 

Gross  income  (233) 20 

N  et  income  (232) 20 

(39) 


40 

Corporations — Continued. 

Personal  service —  -  3 

Alternative  tax  on  (1332) 

Dividends  (201) 

Exemption  of  (231) 

Fiscal  year  ended  in  1922,  computation  of  tax  (205) 

Fiscal  year  ended  in  1918,  computation  of  profits  tax  {SS5) 

Taxation  of  (218) 

Rates  of  tax  (230) 

Returns  (239): 

Returns,  consolidated  (240) 

Returns,  time  and  place  for  filing  (241) 

Transportation,  allocation  of  tax  on  (£30) 

Withholding  (237) 

Corporations  entitled  to  benefits  of  section  262 — 

Credit  for  taxes  (238) 

Excess  profits  credit  (312) 

Returns,  consolidated  (240) 

Special  cases,  computation  of  profits  tax  (328) 

Special  cases,  profits  tax  (327) 

Courts,  jurisdiction  of  {1318,  1310) 

Credits  allowed — 

Corporation  (236) 

Dependents,  credit  for  (216) 

Dividends  from  personal  service  corporations  (216) 

Individuals  (216) 

Nonresident  aliens  (216) 

Credits,  taxes  overpaid  (252) 

Decedent,  assessment  of  tax,  limitation  (250) 

Deductions^ 

Citizens  entitled  to  benefits  of  section  262  [214(b)] 

Corporations  (234) 

Corporations  entitled  to  benefits  of  section  262  [234(b)] 

Holder  of  life  or  terminable  interest  (215) 

Individuals  (214) 

Definitions  (200) 

Definitions,  general  (1,2) 

Definitions,  profits  tax  (300) 

Depletion — 

Deduction  by  corporations  [234(a)9] 

Deduction  by  individuals  [214(a)10] 

Deduction  when  net  loss  (204) r. 

Depreciation — • 

Deduction  by  corporations  [234(a)7] 

Deduction  by  individuals  [214(a)8] 

Distribution  in  liquidation  (201) 

Dividends- 
Building  and  loan  association  (213) 

Credit  against  net  income  (216) 

Deduction  by  corporation  [234(a)6] - . 

Deduction  when  net  lo'ss  (204) 

Definition,  etc.  (201) 

Income  of  nonresident  aliens  [213,  217] P,  13 

Return  of  information  (254) 30 

Withholding  (221) 17 

Discovery  value — 

Depletion  deduction  by  corporation  [234(a)9] 

Mines,  oil  and  gas  wells,  depletion  based  on  [214(a)10] 

Effective  date  of  Act  {1409,  1404) 

Effective  date  of  Title  II  (263) 

Effective  date  of  Title  III  (338) 

Estates  and  trusts,  returns  (225) 

Estates  and  trusts,  taxation  of  (219) 

Evasion  of  surtax  by  incorporation  (220) 

Examinations,  unnecessary  ( 1309) 

Exchange  of  property,  gain  or  loss  (202) 


41 

Page. 
Farmers',  fruit  growers'  or  like  asaociation,  purchaaiDg  agent,  exemption  of 

(231) 19 

Fiduciaries,  returns  (225,  227) 18, 19 

Final  determinations  and  assessments  (1312) 35 

Fiscal  year — 

Computation  of  tax  (205) 5 

Credit  for  profits  tax  (236) , 24 

Credit  for  taxes,  corporations  (238) 24 

Credit  for  taxes,  individuals  (222) 17 

Member  of  partnership  (218) 15 

Member  of  personal  service  corporation  (218) 15 

Net  loss,  fiscal  year  ended  in  1921  (204) 4 

Profits  tax,  computation  (335) 33 

Foreign  items,  collection  of  (259) 30 

Fractional  parts  of  cent  {131S,  1306) 34 

Frauds  on  purchasers  {1319, 1326) 36 

Gain  or  loss,  basis  for  determining  (202) 2 

GiiXs,  sale  of,  gain  or  loss  (202) 2 

Government  contracts,  inspection  of  {1408) 38 

Government  contracts,  profits  tax  on  income  from  (301) 31 

Gross  income — 

Corporations  (233) / 20 

Individuals  (213) 7 

Nonresident  alien  (213,  217) 9, 13 

Income  from  sources  within  possessions  of  United  States  (262) 30 

Income  from  sources  within  the  United  States  (213,  217) 9, 13 

Income  from  sources  without  the  United  States  (217) 13 

Income  subject  to  tax  rates  for  different  years  {206) 6 

Incorporation  of  individual  or  partnership  busiaeas  {330,  229) 33, 19 

Individuals — 

Credit  for  taxes  (222) 17 

Credits  allowed  (216) 12 

Deductions  (214) 9 

Gross  income  (213) 7 

Incorporation  of  business  {330,  229) 33, 19 

Net  income  (212) 7 

Returns  (223,  227) 18, 19 

Inheritance,  sale  of  property  received  by,  gain  or  loss  (202) 2 

Inspection  of  returns  (257) 30 

Insurance  companies — 

Deductions  [234(a)10] 23 

Life,  health,  and  accident  policies,  deductions  [234(a)ll] 23 

Mutual,  deductions  [234(a)13] 23 

Mutual  marine,  deductions  [234(a)12] 23 

Mutual  marine,  gross  income  (233) 20 

Net  income,  limitation  of  credit  for  taxes  (238) 24 

Net  lo3s,  deduction  of  (204) 4 

Taxation  of  [233{a)l,  2;  234{a)10,  11,  12,  13;  242-247] 21,  23,  27 

Insurance  proceeds,  exemption  of  (213) 7 

Interest — 

Building  and  loan  association  (213) 7 

Deduction  by  corporations  [234(a)2] 21 

Deduction  by  individuals  [214(a)2] 9 

Income  of  nonresident  aliens  {213,  217) *. 9, 13 

Postal  savings  deposits  (213) 7 

Refunds  and  judgments  (1324) 36 

Tax-free,  treatment  when  computing  net  loss  (204) 4 

Withholding  from  bank  deposits  (221) 17 

Inventories,  basis  of  computation  (203) 4 

Inventories,  loss  in  \214(a)12,  234{a)14] 11.  23 

Invested  capital  (325,  326,  327) 32 

Invested  capital,  adjustment,  refund  of  tax  overpaid  (252) 29 

Involuntary  conversion  of  property — 

Corporations  [234(a)14] 23 

Gain  or  loss  from  (202) 2 

Individuals  [214(a)12] 11 


42 

Pa-e. 

Items  not  deductible,  corporations  (235) 23 

Items  not  deductible,  individuals  (215) 12 

Jugments,  interest  on  (1324) 36 

Laws,  application  of  {1S05,  1300) 34 

Liberty  bond  exemptions,  consolidation  of  (132vS) 37 

Life  or  terminable  interests,  deductions  from  (215) 12 

Liquidation  distribution  (201) 1 

Literary  corporation,  exemption  of  (231) 19 

Losses,  deduction  by  corporations  [234(a)4] 21 

Losses,  deduction  by  individuals  [214(a)4,  5,  6] 9 

Losses,  inventory  {214{a)12,  234(a)14] 11,  23 

Market  value,  readily  realizable  (202) 2 

Meals  and  lodging,  deduction  by  traveling  man  [214(a)l] 9 

Merger,  gain  or  loss  (202) 2 

Mines,  oil  and  gas  wells — 

Depletion  [214(a)10,  234(a)91 10,22 

Profits  tax  on  gain  from  sale  (337) 34 

Surtax  on  gain  from  sale  (2li) 6 

Minister  of  the  gospel,  rental  value  of  quarters  (213) 7 

Net  income — 

Corporations  (232) 20 

Individuals  (212) .• 7 

Period  less  than  twelve  months,  computation  of  tax  (226) 18 

Net  losses,  deduction  of  (204) 4 

Notice  and  demand  for  payment  of  tax  (250) 27 

Partnerships- 
Incorporation  of  business- (^50,  229) 33, 19 

Profits  tax  computation  when  fiscal  vear  ended  in  1918  (.335) 33 

Returns  (224,  227) * . .' .' 18, 19 

Taxation  of  (218) 15 

Witliholding  from  income  of  (221) 17 

Payment  of  tax  at  source — 

Corporations  (237) 24 

Individuals  (221) 17 

Penalties,  ad  valorem  (250) 27 

Penalties,  specific  (253) ...'.... 30 

Pensions  from  United  States  (213) 7 

Personal  exemption  (216) 12 

Personal  service  corporations.     (See  Corporations:  Personal  service.) 

Porto  Rico  and  Philippine  Islands,  income  tax  in  (261) 30 

Possessions  of  United  States,  citizens  of,  taxation  (260") 30 

Possessions  of  L^nited  States,  income  from  sources  within  (262) 30 

Postal  savings  deposits,  interest  (213) 7 

" Produced "  defined  (217) 13 

Profit-sharing  trust,  taxation  of  (219) 16 

Prewar  period,  definition  (310) 32 

Publication  of  statistics  (258) 30 

Rebates,  loss  from  [214{a)12,  234{a)U] 11,  23 

Receipts  for  taxes  (251) 29 

Refunds — 

Authority  for  (i5i6.  252,  1315) 29,35 

Intere.'^t  on  n324) 36 

Taxes  overpaid  (252) 29 

Regulations,  retroactive  (1314) ..• 35 

Rentals,  income  of  nonresident  aliens  (217) 13 

Reorganizations  {330,  229) 33, 19 

Reorganizations,  defined  (202) 2 

Reorganizations,  gain  or  loss,  exchange  of  property  (202) 2 

Repeals  (1400) 38 

Reserve  for  bad  debts,  deduction  by  (Corporations  1 234(a)5] 22 

Reserve  for  bad  debts,  deduction  by  individuals  [214(a)7] 10 

Returns- 
Authority  to  require  {1305,  1307) 34 

Consolidated  (240) 26 

Consolidated  for  1917  (1331) 37 

Corporation  (239) 25 


43 

Returns — Continued.  Page. 

Estates  and  trusts  (225) 18 

False  or  fraudulent,  limitation  of  assessment  (250) 27 

Fiduciary  (225,  227) 18,19 

Individual  (223,  227) 18, 19 

Information — 

Brokers  (255) 30 

Dividend  payments  (254) 30 

Payments  of  $1,000  and  over  (256) 30 

Inspection  of  (257) 30 

Partnersliip  (224,  227) 18, 19 

Periods  less  than  twelve  months  (226) 18 

Time  and  place  for  filing,  corporations  (241) 27 

Time  and  place  for  filing,  individual,  partnership  and  fiduciary  (227) 19 

Understatements  in  (228) 19 

War  profits  and  excess  profits  tax  (336) 33 

Revised  Statutes,  United  States — 

Amendments  {1S16, 1317,  1316,  1318,  1319) 35,  36 

Reenactments  (1311,  1323) 35,  36 

Royalties,  income  of  nonresident  aliens  (217) 13 

Rules  and  regulations,  authority  for  {1S09,  1303) 34 

"Sale"  and  "sold"  defined  (217) 13 

Sales — 

Gain  or  loss  from  (202) 2 

Installment,  gain  or  loss  (202) 2 

Losses,  so-called  "wash  sales"  [202,  214(a)5,  234(a)4] 2,9,21 

Property  in  United  States  by  nonresident  aliens  (217) 13 

Saving  clause  in  event  of  unconstitutionality  (1402,  1403) 38 

Shipowners'   mutual   protection  and  indemnity  association,  exemption  of 

receipts  [213(b)12] 7 

Ships  documented  under  laws  of  foreign  country,  income  from  [213(b)8] 7 

Stock  bonus  trust,  taxation  of  (219) 16 

Surety,  deposit  of  United  States  bonds  or  notes  in  lieu  of  {1320,  1329) 37 

Surtax  (211) 6 

Surtax,  evasion  by  incorporation  (220) 16 

Suit,  collection  of  tax,  limitation  (250,  1318) 27,36 

Taxes — 

Accrued  under  prior  Acts,  assessment  and  collection  (250) 27 

Assessment,  limitation  of  (250) 27 

Bank  stock,  deduction  [214(a)3,  234(a)3] 9,  21 

Collection  by  suit,  limitation  (250,  1318) 27,  36 

Credit  for,  corporations  (238) 24 

Credit  for,  domestic  corporation  affiliated  with  foreign  corporation  {240, 238)  25,  26 

Credit  for,  individuals  (222) 17 

Deduction  by  corporations  [234(a)3] 21 

Deduction  by  individuals  [214(a)3] 9 

Estate,  deduction  [214(a)3,  234(a)3] 9,  21 

Payment — 

Checks  or  United  States  securities  {1314,  1325) 36 

Deficiency  when  undue  hardship  (250) 27 

Time  for  (250) 27 

Payment  at  source  for  corporation  (237) 24 

Payment  at  source  for  individual  (221) 17 

Rates  of — 

Capital  gain  (206) 6 

Corporations  (230) 19 

Income  subject  to  rates  for  different  years  {206) 6 

Individuals  (210) « 6 

Profits  tax  (301,  337) 31,  34 

Surtax,  individuals  (211) 6 

Surtax,  sale  of  mineral  deposits  (211) 6 

Receipts  for  (251) 29 

Refund  or  credit  when  net  loss  in  preceding  year  (204) 4 

Withheld  from  interest  on  tax-free   covenant  bonds,   gross  income  of 

bondholder  [234(a)3] 21 

Tax  Simplification  Board  (1327) 36 

Termination  of  taxable  period  (250) 27 


44 

Page. 

Trades  or  businesses,  related,  consolidation  of  returns  (240) 26 

Traveling  expenses  [214(a)  1] 9 

Trusts  {See  Estates) 

Understatement  in  returns  (228) 19 

War  profits  and  excess  profits  tax — 

Definitions  (300). 31 

Excess  profits  credit  defined  (312) 32 

Exemption,  specific,  apportionment  of  (305) 32 

Exemptions  (304) 32 

Fiscal  year  computations  (335) 33 

Invested  capital  (325,  326,  327) 32 

Limitation  (302) 31 

Mines,  oil  and  gas  wells,  sale  of  (337) 34 

Net  income  defined  (320) : 32 

Personal  service  business  in  part  (303) 31 

Prewar  period  defined  (310) 32 

Rates  (301) 31 

Reorganizations  {SSO,  331) 33 

Returns  (336) 33 

-  Special  cases  (327) 32 

Special  cases,  computation  of  tax  (328) 33 

Valuation  of  assets  upon  reorganization  (331) 33 

War  profits  credit  defined  (311) 32 

•'Wash  sales,"  losses  from  [202,  214(a)5,  234(a)4] 2,9,21 

Withholding,  corporations  (237) 24 

Withholding,  individuals  (221) 17 

o 


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